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Debt mutal fund redemption

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This query is : Resolved

Prashant Shah (Querist)

02 January 2026 I have certain debt mutual fund units bought before 1st April 2023. Currently if this units are redeemed then they are taxable at 12.5% flat without indexation (let me know if understaning is correct).
Can I sell these units and its LTCG can be used to purchase a residential property claiming exemption under section 54F?
Suggest me a way to go for least tax liability.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 January 2026 Yes, your understanding is broadly correct: debt mutual funds purchased before 1 April 2023, if redeemed now, attract LTCG tax at 12.5% flat without indexation. And Section 54F exemption can be claimed on LTCG from mutual funds (including debt funds) if the proceeds are invested in a residential property, subject to conditions. The least tax liability strategy is to time redemption and reinvestment carefully, ensuring compliance with Section 54F rules.

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