Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Debt Products

Ms. Kavita Iyer, a resident individual aged 35 in the 30% slab, invested in a debt mutual fund unit on 1 June 2023 and redeemed it on 1 July 2025. Assume it is a specified mutual fund under the Income-tax Act (invests more than 65% in debt and money market instruments) and was acquired after 31 March 2023. How are the gains taxed?

Her gains are taxed at her slab rate as deemed short-term capital gains, regardless of the two-year holding. Specified mutual funds with more than 65% in debt, acquired after 31 March 2023, get no long-term treatment or indexation benefit.

  1. ALong-term capital gain at 12.5% without indexation
  2. BLong-term capital gain at 20% with indexation
  3. CTaxed at her slab rate as deemed short-term capital gain irrespective of holding periodCorrect
  4. DExempt up to ₹1.25 lakh and 12.5% thereafter

Explanation

Gains on specified mutual funds acquired on or after 1 April 2023 are deemed short-term capital gains and taxed at the slab rate regardless of holding period. Indexation is not available, so the 20% and 12.5% long-term options fail. The ₹1.25 lakh exemption applies only to long-term gains on equity assets.

Did you get it right without looking?

One question tells you little. A timed set on Taxation of Debt Products shows your real accuracy, how long you take and where you lose marks.

Practise Taxation of Debt ProductsFree diagnostic mock

More Taxation of Debt Products questions