Srinivas P, 26 years, Architect. What should I know about the tax associated with mutual funds?

Tax consideration is an aspect investors should look into carefully before investing in a Mutual Fund. As an investment vehicle, mutual funds are quite efficient in terms of post-tax returns. When equity fund units are redeemed, the returns so generated are taxed according to the period of holding and the applicable tax rate. For equity funds, Long Term Capital Gains (holding period of 12 months and above) are taxed at 10% over and above the exemption limit of 1 Lakh.

Short Term Capital Gains ( holding period of lesser than 12 months) are taxed at 15%

For Debt funds, indexation benefit is available for capital gains realized.

(For these funds, a holding period of 36 months or more is considered as long term. Any holding period which is less than 36 months is treated as short term and the gains are added to the income of investors for tax calculation). So take the tax aspects of the fund category you are looking to invest in before you take a call.

The query is answered by Harsh Jain, Co-founder and COO, Groww