Keeping your money stable is super important in today’s fast-paced globe. It helps secure your future and takes care of your family. While numerous people want to make more money, it’s also vital to know how your investments work.
Understanding the terms and conditions of mutual funds is essential for making well-informed choices. Since mutual funds are subject to income tax, which affects your profits, understanding mutual fund taxation is essential. Today, in this blog, we will take a closer look at mutual funds and the various taxation factors that affect your investments.
What are Mutual Funds?
A mutual fund is a wise investment choice. You invest your money, and professionals manage it by spreading the risk by investing in a variety of securities like stocks and bonds. They ensure the growth of your funds. Since mutual funds have performed well and are simple to handle, many individuals favor them.
Taxation of Mutual Funds
Mutual funds are a top investment choice, but remember, they can be taxed. This is primarily why you need to be familiar with the taxation system before you start investing.
There are certain cases where you can save taxes on mutual fund profits. The taxation criteria depend upon the holding period of your mutual fund investment. The short-term and the best long term mutual funds are taxable under different rates. Let’s explore the rate of taxation for mutual funds under capital gains here:
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Equity funds or Hybrid Equity-oriented funds
In this type of mutual fund, the short-term capital gains will be charged at 15% with CESS and surcharge. In the best long term mutual funds capital gains, if the profit is up to 1 lakh, then it will be taxed at 10% with CESS and surcharge.
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Debt Funds or Hybrid Debt-Oriented Funds
In this case, the payable tax will be applicable according to the investor’s IT slab rate. This is common for both short-term and long-term capital gains.
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Securities Transaction Tax
There is another tax, called the securities transactions tax, in mutual funds. The 0.001% charges will be applicable on the transaction that you made while buying or selling mutual funds units. You won’t have to pay securities transactions tax on the transaction of debt fund units.
Document Required for Mutual Fund Investment
Some essential documents are required for mutual fund investment. Let’s explore all the important documents here:
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Identity Proof
Identity proof such as a PAN Card (Mandatory), Voter ID Card, Driving License, Passport, Aadhar Card, or any other valid identity card issued by the Central or State Government of India.
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Address Proof
Address proof such as a Voter ID Card, Driving License, Passport, Ration Card, Aadhar Card, Bank account statement or bank passbook, and Utility bills.
Wrapping Up
Mutual fund taxation is an important thing to consider when investing in mutual funds. There are different taxation criteria for equity funds, debt funds, and securities transaction rates, which an investor needs to understand to make better investment decisions. While going through all the details mentioned above, you will understand the taxation for mutual funds in detail.
