How Mutual Fund Capital Gains are taxed in India

Mutual fund tax structure
6 Sep, 2017, 07:57AM UTC by Jaydip Mehta


As an NRI, you need to understand the tax rules before investing in Indian Mutual Funds. The gains you make in this investment are subject to taxes. Read on to learn the tax rates that are applicable on both short-term and long-term capital gains from your debt or equity mutual funds.

You must be aware of the long-term growth prospects of the Indian equity market.  To benefit from the equity market of India in the long run, it is a also a great idea to invest in Indian Mutual Funds.

factors of mutual fund taxation

Now let us get back to the applicable tax rates on your mutual funds investment. This might attract major confusion because your portfolio manager is supposed to deduct TDS at the highest applicable rate. There might develop a difference between the applicable tax rate and the TDS charged on your investments. In order to get the additional tax deduction back into your account, you need to file for an income tax refund. To avoid all such probable confusion, you must know the applicable tax rates.


The following table chalks the applicable tax rates and the corresponding TDS rates for your investments in Indian mutual funds.

Mutual fund capital gain tax rates


Read More: Most asked questions about Mutual Funds

In case you are not sure about the different kinds of mutual funds and their holding period, here is something for you:

mutual fund holding period

Addendum: A 15% surcharge is applicable for income above Rs. 1 crore. A 10% surcharge is levied on income above Rs. 50 lacs but below Rs. 1 crore. A 3% education cess will apply on aggregate of surcharge and tax.

The TDS rates applicable on your mutual fund investments are as follows:

Read More: 10 advantages of SIP

You might be interested in opting for dividends. The taxation in this case is different. Follow the table given below:

rate of tax on distributed network


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Again, security transaction charges are levied on equity-oriented mutual funds. This category of mutual fund needs to be bought and sold through a recognized stock exchange. Therefore, a Security transaction tax (STT) is levied on the same.

security transaction tax rates

7 thoughts on “How Mutual Fund Capital Gains are taxed in India

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