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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

Meera, a resident individual, holds a debt mutual fund (one that invests no more than 35% in domestic equity) bought after 1 April 2023. How are gains on its redemption taxed?

Gains are taxed at the investor's slab rate regardless of how long the units are held. Debt funds with no more than 35% in domestic equity, bought on or after 1 April 2023, are treated as short-term assets, and indexation is not available.

  1. AAs long-term gain at 20% with indexation after 3 years
  2. BAs long-term gain at 10% without indexation
  3. CAs short-term gain at 15% irrespective of holding period
  4. DAt the investor's applicable slab rate, irrespective of the holding periodCorrect

Explanation

For specified mutual funds purchased on or after 1 April 2023, gains are deemed short-term and taxed at the investor's slab rate regardless of holding period, with no indexation. The 20% indexation and 10% options reflect older or equity rules.

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