Grandfathered debt funds taxation to use 20% with Indexation ?

287 views 1 replies

As a salaried individual.

I purchased some debt mutual funds in 2020 and sold them in May 2025. For taxation purposes can i pay 20% with indexation ?
 
As per Chatgpt these units are grandfathered and hence the new 12.5% w/o indexation doesnt apply to them ? 
Can some experienced CA comment on whether its possible to claim indexation to calculate the net income from them and also pay 20% tax on them. If yes will this lower income (due to indexation) coutn towards the surcharge applicability or the full delta betweel sale and purchase costs be used to the purposes of calulating total incoem for surcharge applicability > 
 
 
Replies (1)

Teh relevant section on gransfathering clause explicitly states that equity mutual funds and bonds can not avail grandfathering , however is silent on debt oriented mutual funds. :- 
https://incometaxindia.gov.in/Documents/Left%20Menu/income-from-capital-gains.htm?utm_source=chatgpt.com

* The Finance (No. 2) Act, 2024 removed the indexation benefit and introduced a uniform tax rate of 12.5% on long-term capital gains. As per the amendment, no indexation benefit is allowed while computing capital gain from long-term capital assets transferred on or after 23-07-2024. However, the Government has introduced a grandfathering provision. This provision allows resident individuals and resident HUFs to still apply indexation on land or building acquired before 23-07-2024 and pay tax at the old rate of 20% if the tax under the new law (i.e., tax calculated at 12.5% without indexation benefit) results in a higher amount.

However, there are some cases where benefit of indexation is not available, which are as under:

 

Section

Capital Asset

Transferor

Third Proviso to Section 48 Long-term capital gains arising from transfer of an equity share, or a unit of an equity oriented fund or a unit of a business trust as referred to in Section 112A. Any Person

Fourth proviso to section 48

Bonds or debentures.

Note: However, indexation benefit is available on two type of bonds, namely,-

  •  Capital indexed bonds (issued by the Government)

  •  Sovereign Gold Bond (issued by the RBI under the Sovereign Gold Bond Scheme, 2015)

Any person

112

Capital gains arising from transfer of unlisted shares (which is taxable at concessional rate) as calculated without giving effect to first proviso to Section 48

Non-resident

50A

Depreciable asset (other than an asset used by a power generating unit eligible for depreciation on straight line basis)

Any person

50B

Undertaking/division transferred by way of slump sale as covered by section 50B

Any person

115AB

Units purchased in foreign currency as given in section 115AB

Offshore fund

115AC

Global depository receipts (GDR) purchased in foreign currency as given in section 115AC

Non-resident

115ACA

Global depository receipts (GDR) purchased in foreign currency as given in section 115ACA

Resident individual - employee

115AD

Securities as given in section 115AD

Foreign Institutional

Investors

 


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register