Skip to content

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

Under the Income-tax Act as applicable to debt mutual funds, which statement best describes the tax treatment of gains on units of a specified mutual fund (a fund investing more than 65% in debt and money market instruments) purchased after 1 April 2023?

Gains on specified mutual funds bought after 1 April 2023 are treated as short-term capital gains and taxed at the investor's slab rate, regardless of how long the units are held. No indexation or long-term concessional rate applies to them.

  1. AGains are taxed as short-term capital gains at slab rates irrespective of holding periodCorrect
  2. BGains are taxed as long-term capital gains at 12.5% after 24 months
  3. CGains are taxed at 20% with indexation after 36 months
  4. DGains are fully exempt if held for more than 12 months

Explanation

Units of specified mutual funds acquired on or after 1 April 2023 are deemed short-term capital assets, so gains are taxed at the investor's slab rate regardless of holding period. Indexation and long-term treatment are not available. The 12.5% and 20% options belong to other asset classes or earlier regimes.

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