The government has done away with a tax law that allowed investors to benefit from indexation on long-term capital gains on a number of mutual fund schemes, including debt mutual fund schemes. The new norms come into effect on April 1.
This means that all such investments made before that date will continue to enjoy the benefits.
Gains from debt mutual fund schemes, international funds, fund of funds, and gold exchange traded funds are currently designated as long-term if they are held for more than three years.
Once units are redeemed, gains are taxed at 20% after indexation. Indexation allows for gains to be adjusted for inflation during the holding period of the investment.
Now, for all such investments made on or after April 1, all gains will be considered short-term capital gains, and they will be taxed at the slab rate.
To find out whether investors should deploy funds into debt mutual funds this week and what their strategy should be starting April 1, BQ Prime spoke with Kirtan Shah, founder and chief executive officer at Credence Wealth Advisors LLP, and Suresh Sadagopan, managing director and principal officer at Ladder7 Wealth Planners Pvt.
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