Mutual fund tax calculator — equity, debt and gold capital gains tax
Equity, debt and gold funds are taxed under three completely different sets of rules. Enter what you invested, what you are redeeming and how long you held it — see the short-term or long-term classification, the exact rate, cess and what actually reaches your bank account.
In Short
In FY 2026–27, equity mutual funds are taxed at 20% if held 12 months or less and 12.5% beyond that, with the first ₹1.25 lakh of long-term equity gains each year exempt. Debt mutual funds bought on or after 1 April 2023 have no long-term rate at all — every rupee of gain is added to your income and taxed at your slab rate, up to 30%. Gold mutual funds sit in between: slab rate up to 24 months, then 12.5%. A 4% health and education cess applies on top of every figure.
Your redemption
Pick the fund type first — it changes every rule below.
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₹1,000₹50L₹1Cr₹1.5Cr₹2Cr
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₹1,000₹50L₹1Cr₹1.5Cr₹2Cr
mo
1 mo20 yrs
Not used for this case: the rate is flat at 12.5%. Set it anyway to compare fund types below.
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₹0₹1.25L
Long-term equity gains you have already booked this financial year.
Tax on this redemption
Long-term gain
Tax payable
₹22,7507.6% of your gain
Tax ₹22.8KYou keep ₹2.8L
Capital gain₹3,00,000
Holding period1y 6m · threshold 12 mo
Less ₹1.25 L exemption−₹1,25,000
Taxable gain₹1,75,000
Tax rate appliedLTCG @ 12.5%
Tax before cess₹21,875
Health & education cess (4%)₹875
Net gain in hand₹2,77,250
Why this rate
Equity-oriented funds held for more than 12 months qualify as long-term. Gains are taxed at a flat 12.5% with no indexation, after the ₹1.25 lakh annual exemption on long-term equity gains. The Section 87A rebate cannot be set against this tax.
Splitting this redemption across two financial years would give you a second ₹1.25 lakh exemption. Booking ₹1,25,000 of gains before 31 March and the rest after can wipe out the tax entirely.
Includes 4% health & education cess. Surcharge (10%–15% on capital gains for high incomes) is not applied. Figures are indicative — confirm with your tax adviser before filing.
Same gain, three fund types
A gain of ₹3,00,000 held for 1y 6m at a 30% slab — taxed three different ways.
The gap is not about which fund is better — it is about matching holding period to fund type. A debt fund exited after five years is taxed exactly like one exited after five months, so debt funds earn their place through stability and liquidity, not tax efficiency. Gold and equity, by contrast, reward patience.
The tax rules, explained
Three amendments reshaped mutual fund taxation in quick succession — the 1 April 2023 debt fund change, the 23 July 2024 rate revision, and the narrowing of the “specified mutual fund” definition from AY 2026–27. Here is where each category stands today.
Equity mutual fund tax
At least 65% of assets in domestic listed equity
Short term
Held ≤ 12 months
20% + cess
Long term
Held > 12 months
12.5% + cess
Long-term threshold12 months
Annual exemption₹1,25,000 of LTCG
IndexationNot available
Also coveredELSS, index funds, arbitrage, equity savings, equity FoFs ≥90% in equity ETFs
A scheme qualifies as equity-oriented when it invests at least 65% of its total proceeds in equity shares of domestic companies. Sell within 12 months and the gain is short-term, taxed at a flat 20% — a rate that rose from 15% on 23 July 2024. Your income slab makes no difference; even a zero-tax investor pays 20% on a short-term equity gain.
Cross the 12-month mark and the rate drops to 12.5%, and the first ₹1.25 lakh of long-term equity gains in the financial year is exempt. That exemption is per person per year across all equity funds and listed shares combined, and it resets every 1 April — which makes it the single most useful lever in mutual fund tax planning. Note that the Section 87A rebate cannot be used against tax on these long-term gains, so even a small taxable LTCG creates a liability for an otherwise tax-free income.
ELSS deserves a mention: its three-year lock-in means every redemption is automatically long-term. The 80C deduction on the investment, however, is available only if you file under the old tax regime.
Worked example
You invest ₹5,00,000 in a flexi-cap fund and redeem at ₹8,00,000 after 18 months. Gain ₹3,00,000. Minus the ₹1,25,000 exemption, ₹1,75,000 is taxable at 12.5% = ₹21,875, plus 4% cess = ₹22,750. Redeem the same units at month 11 instead and you would pay 20% on the full ₹3,00,000 = ₹62,400 — nearly three times as much.
Debt mutual fund tax
More than 65% in debt and money market instruments
Short term
Any holding period
Slab rate + cess
Long term
Only pre-Apr 2023 units, > 24 mo
12.5% + cess
Long-term thresholdNone for post-Apr-2023 units
Annual exemptionNone
IndexationWithdrawn 23 July 2024
Also coveredLiquid, overnight, corporate bond, gilt, credit risk, conservative hybrid
Debt funds lost their long-term status on 1 April 2023. Units bought on or after that date are "specified mutual funds": every rupee of gain is deemed short-term no matter how long you hold, added to your total income and taxed at your slab rate — 31.2% including cess for a 30%-slab investor. There is no ₹1.25 lakh cushion and no indexation.
This means holding period is irrelevant to your debt fund tax bill. Exiting after five years costs the same rate as exiting after five weeks. What remains is the deferral benefit: unlike a fixed deposit, where interest is taxed annually as it accrues, a debt fund is taxed only when you redeem, so the untaxed gain keeps compounding until you exit. That, plus liquidity and no penalty on early withdrawal, is the real case for debt funds today.
Older units are treated differently. If you still hold debt fund units bought before 1 April 2023, they are grandfathered: held for more than 24 months, the gain is long-term at 12.5% — though indexation on those gains was itself withdrawn from 23 July 2024, so the old 20%-with-indexation route is gone.
One definitional update matters. From AY 2026–27, a specified mutual fund means a scheme investing more than 65% of its assets in debt and money market instruments, or a fund of funds putting at least 65% into such schemes. The earlier test looked at equity exposure of 35% or less, which had pulled gold and international funds into the slab-rate net. They are now outside it.
Worked example
You invest ₹5,00,000 in a corporate bond fund in June 2024 and redeem at ₹8,00,000 in 2030 — a ₹3,00,000 gain after six years. Because the units were bought after 1 April 2023, the entire gain is short-term: at a 30% slab that is ₹90,000 plus cess = ₹93,600. The same gain in an equity fund would have cost ₹22,750.
Gold mutual fund tax
Fund of funds investing in a gold ETF
Short term
Held ≤ 24 months
Slab rate + cess
Long term
Held > 24 months
12.5% + cess
Gold fund (FoF) threshold24 months
Gold ETF threshold12 months (listed security)
IndexationNot available
Sovereign Gold BondsGains on redemption at maturity are exempt
Gold funds have had the most eventful ride of the three. Before Budget 2024 they were slab-rate assets with a 36-month threshold. The July 2024 changes pulled them briefly under the specified mutual fund rule, making all gains slab-taxed regardless of holding. From 1 April 2025 the narrowed definition finally released them: a gold mutual fund held for more than 24 months is long-term and taxed at 12.5% without indexation. Held for 24 months or less, the gain is added to your income at your slab rate.
The route you choose changes the timeline. A gold ETF bought on the exchange is a listed security, so it turns long-term after just 12 months — a full year earlier than the gold fund of funds that invests in the very same ETF. If you have a demat account and expect to exit inside two years, the ETF is the more tax-efficient wrapper; if you want to run a monthly SIP without a demat account, the fund of funds is more practical and the 24-month wait rarely matters for a long-term gold allocation.
Sovereign Gold Bonds sit outside all of this: capital gains on redemption at maturity are exempt for individuals, though the 2.5% annual interest is taxed at slab rate. Physical gold and digital gold follow the 24-month threshold with 12.5% long-term tax.
Worked example
You invest ₹5,00,000 in a gold fund and redeem at ₹8,00,000. At month 20 the ₹3,00,000 gain is short-term: at a 30% slab, ₹93,600 with cess. Wait until month 25 and it becomes long-term: 12.5% on ₹3,00,000 = ₹37,500 plus cess = ₹39,000. Five months of patience saves ₹54,600.
Where hybrid, international and FoF schemes land
Anything that is not plainly equity, debt or gold is classified by what it actually holds. Use this to place your scheme in one of the three buckets above.
Scheme typeLong-term afterRateTreated as
Aggressive hybrid (65%+ equity)12 months12.5%Equity fund
Balanced advantage / dynamic asset allocation12 months12.5%Equity fund, if equity is kept ≥65%
Conservative hybrid (debt-heavy)No benefitSlabSpecified mutual fund
Multi-asset allocationDepends on equity share12.5% or slabEquity if ≥65% domestic equity, else check the debt share
International equity fund / FoF24 months12.5%Non-equity, but outside the debt definition since AY 2026–27
Sovereign Gold Bond (held to maturity)—ExemptInterest still taxed at slab
How the rules changed
1 Apr 2023
Debt funds lose long-term status
New units in schemes with ≤35% equity became specified mutual funds — all gains short-term, taxed at slab rate.
23 Jul 2024
Rates reset, indexation goes
Equity STCG 15% → 20%, LTCG 10% → 12.5%, exemption ₹1 L → ₹1.25 L. Indexation withdrawn across asset classes.
1 Apr 2025
Gold and international funds released
The specified mutual fund test switched to a >65% debt holding. Gold and international funds regained 12.5% LTCG after 24 months.
FY 2026–27
Where we are now
Rules re-enacted under the Income-tax Act, 2025 with no change in rates. Three thresholds in play: 12, 24 and none.
Cutting the tax legally
1
Harvest the ₹1.25 lakh every year
Book long-term equity gains up to ₹1.25 lakh each financial year and reinvest immediately. The exemption does not carry forward — unused, it is gone on 31 March.
2
Split a large redemption across two years
Redeeming ₹2.5 lakh of long-term equity gains in one go leaves ₹1.25 lakh taxable. Redeem in late March and early April instead and both tranches can fall inside separate exemptions.
3
Watch the crossover dates, not the calendar year
For equity, one extra day past 12 months moves you from 20% to 12.5%. For gold funds and international funds it is 24 months. Check your first purchase date before pressing redeem.
4
Set off losses before they lapse
Short-term capital losses can be set off against both short and long-term gains; long-term losses only against long-term gains. Unabsorbed losses carry forward eight years, provided you file the return on time.
5
Choose the wrapper, not just the asset
Arbitrage funds give equity taxation on debt-like risk. Gold ETFs cross to long-term a year sooner than gold funds. Same exposure, different tax outcome.
Practical points people miss
A switch is a redemption
Moving between schemes, or from regular to direct plan of the same scheme, is a taxable transfer. Only a switch between growth and IDCW options within the same scheme code is treated as such — check before you rebalance.
SIP instalments are taxed one by one
Each instalment carries its own purchase date and holding period, and redemptions follow first-in-first-out. A five-year SIP redeemed today will have mostly long-term units and a tail of short-term ones.
No TDS for resident investors
Resident individuals face no TDS on mutual fund redemptions — you must compute and pay the tax yourself, through advance tax if the liability crosses ₹10,000. NRIs do face TDS at source on both gains and IDCW.
IDCW payouts are taxed at slab rate
Dividend or IDCW income from any fund, equity or debt, is added to your income and taxed at your slab. TDS at 10% applies above ₹10,000 in a year. Growth option is almost always the better choice.
Exit load reduces your gain
Compute the gain on the amount actually credited. If a 1% exit load applies on redemption within a year, that cost lowers both your proceeds and your taxable gain.
Frequently Asked Questions
Held for 12 months or less, gains are short-term and taxed at a flat 20% plus 4% cess, regardless of your income slab. Held for more than 12 months, gains are long-term at 12.5% plus cess, with the first ₹1.25 lakh of long-term equity gains in the financial year exempt. Indexation is not available.
