Do I have to pay taxes on profits earned from mutual fund investments?
Yes you will have to pay taxes on the gains that you’ve earned after withdrawing your mutual funds. These taxes are applicable on the type of funds and Gain type.
| Fund type | Stocks of domestic companies |
| Equity funds including Tax saving funds and equity-oriented funds | Minimum 65% investment |
| Hybrid funds | Between 35% and 65% investment |
| Debt funds including liquid funds and international equity funds | Less than 35% investment |
Tax applicable for equity funds including tax saving funds and equity-oriented funds with minimum 65% investment in equity shares of domestic companies.
Note: Some balanced advantage funds in equity funds have more than 65% of domestic stocks fall under indexation benefits and are termed as equity-oriented funds.
| Type of Fund | Gain Type | Short Term Capital Gain | Long Term Capital Gain |
| Equity- oriented funds | Duration | Investments sold within 1 year | Investments sold after 1 year |
| Tax Rate | Your gains will be taxed at the rate of 15% (plus applicable surcharge and cess) | Gains will be taxed at the rate of 10%(plus applicable surcharge and cess) if the capital gains exceed Rs 1 lakh a year. | |
| Hybrid funds | Duration | Investments withdrawn within 3 years. | Investments withdrawn after 3 years. |
| Tax Rate | Taxed at marginal rate depending on your income slab (plus applicable surcharge and cess) | Taxed at 20% after indexation (plus applicable surcharge and cess). | |
| Debt Funds | Duration | These investments can be withdrawn throughout the year. | NA |
| Tax Rate | Taxed at a marginal rate depending on your income slab (plus applicable surcharge and cess). | NA |
Important Points:
- The limit of ₹1,00,000 is cumulative of capital gains on all equity instruments such as stocks and equity mutual funds.
- As Tax Saving Funds have a 3-year lock-in period, all gains will be considered as Long Term Capital Gains.
Please consult a tax consultant or advisor for more information.
Related question(s):
Are mutual funds regulated?
What is indexation and what are its benefits?
