Minimum holding period for capital gain benefit on debt fund now 3 yrs

India Infoline News Service | Mumbai |

In the case of debt mutual funds, the capital gains arising on transfer of units held for more than a year is taxed at a concessional rate of 10 per cent

Finance Minister Arun Jaitley on Thursday in his maiden budget proposed to raise long-term capital gains tax on debt-oriented mutual funds to 20 per cent from 10 per cent, to bring parity with banks and other debt instruments.
However in the Budget 2014-15, it has proposed to increase the period of holding in respect of long term debt funds units from 12 months to 36 months.
In the case of debt mutual funds, the capital gains arising on transfer of units held for more than a year is taxed at a concessional rate of 10 per cent, whereas direct investments in banks and other debt instruments attract a higher rate of tax. This allows tax arbitrage opportunity.
"With a view to remove this tax arbitrage, I propose to increase the rate of tax on long term capital gains from 10 per cent to 20 per cent on transfer of units of such (mutual funds other than equity oriented funds) funds," Union Finance Minister Arun Jaitley said in his Budget speech in Parliament.
These amendments would be effective from April,1 2015 and will accordingly apply, in relation to the assessment year 2015-16 and subsequent assessment years.
 

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