Debt mutual funds taxability

Dear Laxmi Narayan,

First kindly note that you do not get INTEREST on debt funds. It is capital gain or loss what you get and its tax treatment is not as interest received but capital gain or loss.

Secondly from current accounting year 2014-15, the holding period of debt funds has been increased to 3 years from initial 1 year to qualify the gain/loss as long term capital gain/loss. If the holding period is less than 3 yeras it will be termed as short term capital gain/loss.

LTCG & STCG in debt funds have different tax implication as per new rules.

STCG (holding period less than 3 years) is not indexed and the actual gain or loss is added to the current taxable income and taxed accordingto tax payers income slab 10%, 20% or 30%

LTCG (holding period 3 years or more) is indexed and the LTCG thus calculated is taxed at 20% flat.

Partial withdrawal is also calculated the same way. Withdrawal is nothing but redeeming of units. The cost of buying the units ( equivalent to Rs.30000 ) will be determined on FIFO basis and LTCG calculated.

I hope this may have helped. If you have any further questions regarding this you can mail me on my ID

Regards

Uteesh Dhar

uteesh @ yahoo.com