Before investing in debt mutual funds, know the tax impact on your income.
As per the existing provision of the Income Tax Act, on redemption of debt mutual funds held by you for three years or more, they are considered long-term capital gains, can avail of the indexation benefit, and are taxed at a flat rate of 20% after indexation or 10% without indexation. On the contrary, if your holding period in a debt mutual fund is less than three years, any gain that arises on redemption is taxable at the investor's tax slab rate. But, in the Annual budget 2023, any capital gain on redemption of debt funds purchased on or after April 1, 2022, will be taxed as per the income tax slab rate applicable to your income. Therefore, it can help you defer taxes. Like FDRs, now you must pay…
