Budget 2024: Radhika Gupta, MD and CEO of Edelweiss Mutual Fund discussed in detail the changes in mutual fund taxation following the Union Budget 2024.
The Union Budget 2024 has introduced significant changes to the taxation of mutual funds, aiming to simplify the tax structure and provide clarity for investors. These changes impact various types of mutual funds differently, altering how they are taxed in both the short and long term.
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Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, discussed the overall announcements in the budget on social media platform X and also shared a video explaining the changes in mutual fund taxation following the Union Budget 2024.
She explained that before the Budget, mutual funds were subject to varying tax categories, including long-term and short-term capital gains, marginal tax rates, and indexation benefits.
“With this Budget, all of this gets simplified and the concept of indexation goes away,” Gupta noted.
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How will Budget 2024 impact your mutual fund investments?
Under the new tax regime, there are now three main categories for mutual fund taxation.
The first category includes equity mutual funds with more than 65% equity holdings.
“They are taxed as capital assets—20% in the short term and 12.5% in the long term, with long term being anything held for more than one year,” Gupta said.
The second category consists of funds holding more than 65% in debt securities.
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These are taxed at the marginal rate without any distinction between short-term and long-term investments.
Gupta pointed out that this category remains unchanged from the previous year.
The third category encompasses funds that do not fit into the first two categories, such as gold index funds, gold ETFs, funds of funds investing in equity, international funds, and conservative or hybrid funds.
Gupta said, “These have a taxation in short term at marginal rate and long term is 12.5% where long term means more than two years.”
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Discussing the impact of these changes, Gupta said the benefits for long-term investors in the third category.
“If you are a long-term investor, instead of attracting the marginal rate of taxation, they now attract 12.5% capital gains tax over a two-year long term,” she said.
Overall, she indicated that the Budget 2024 simplifies the tax structure for mutual funds and provides significant benefits for long-term investors in specific categories.
