A version of the finance bill circulating on social media proposes to end LTCG on #debt mutual funds bought after 1 April 2023. Meaning regardless of holding period, you pay tax at slab rate! Currently after 36 months, you pay 20% post indexation. It is a body-blow to debt funds.
Why? Because yields on debt funds are similar to bank FDs, not higher. Without the favorable tax treatment, the case for debt funds almost goes away. I say ALMOST because some benefits still make debt funds marginally better for some people
1) No tax till redemption. FD interest is taxed on accrual
2) Set off and carry forward of capital gains and losses
3) Flexibility- Withdraw or invest as much as you want, anytime. No premature termination penalty. Till we get official confirmation of these proposals, sit tight
2) Set off and carry forward of capital gains and losses
3) Flexibility- Withdraw or invest as much as you want, anytime. No premature termination penalty. Till we get official confirmation of these proposals, sit tight
Also affects international funds and gold funds/ETFs that are taxed as debt funds. It will make buying physical gold more tax efficient (apart from SGBs) than gold ETFs and direct foreign stocks/ETFs through LRS more tax efficient than feeder funds. Second order effects
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