Debt Mutual Fund Tax in New Regime

Yes, the understanding is absolutely correct. Because the Debt Mutual Funds were purchased before April 1, 2023 (in Dec 2020) and held for over 36 months, they qualify for Long-Term Capital Gains (LTCG). The taxpayer can claim the indexation benefit and will pay a 20% tax on the indexed capital gains, even when opting for the New Tax Regime.

That statement would be true if your debt mutual fund units were acquired before 1st April 2023.

As you bought your investment in December 2020 and are redeeming it in December 2025, your investment is grandfathered and qualifies for grandfathered status of debt mutual funds. This means your investment continues to be subject to the LTCG tax regime at whatever rates apply for investments made pre-01st April 2023, regardless of choosing the new tax regime.

^{So in your situation:}

•  Bought in December 2020 (before April 1, 2023)
• Sold in 2025
•  Held for long enough to qualify for long-term capital gains
• New tax regime will not change capital gains on these grandfathered holdings by itself.

Just make sure to collect the statement of capital gains from the AMC/CAMS/KFintech and confirm the calculation yourself while doing your ITR, especially in the case of multiple purchases or SIPs (as eachSIP might be treated separately with regards to purchase dates) .

Yes, the existing replies are correct. 20% with indexation applies for your Dec 2020 debt MF purchase.

The key reason the regime choice does not affect this:

Capital gains have their OWN flat tax rates under Chapter XII of the Income Tax Act, separate from the slab rates. These special rates (20% LTCG with indexation for old debt MF, 10% LTCG on equity, 15% STCG on equity etc.) apply regardless of whether you choose the old or new tax regime. The new regime only removes deductions under Chapter VIA (like 80C, 80D, HRA) and certain exemptions.

For your situation:

- Purchased Dec 2020, sold Dec 2025 , held for 5 years, clearly LTCG

- Purchased before April 1, 2023 , pre-amendment rules apply (Finance Act 2023 removed the benefit only for units bought on/after April 1, 2023)

- So 20% with indexation using the Cost Inflation Index applies

Your new vs old regime choice affects your salary/other income tax calculation only. The 20% LTCG tax on the debt MF is computed separately and stays the same.

For a complete breakdown of capital gains rates by asset class and purchase date, this [capital gains tax rates ready reckoner for AY 2026-27](https://taxgarden.in/blog/capital-gains-tax-rates-asset-class-ready-reckoner-india-ay-2026-27) has the full table including debt MF pre/post April 2023 rules.