Navigating the New Tax Landscape for Mutual Funds in 2024

The 2024 Union Budget has introduced significant changes to the tax structure for mutual funds. The changes include increased rates for Short-Term and Long-Term Capital Gains taxes, and reductions in the holding periods required for tax calculations. Investors must understand these changes to accurately determine their returns on investments.

The 2024 Union Budget has unveiled important revisions in the tax structure for mutual fund schemes. Investors should note that both Short-Term and Long-Term Capital Gains tax rates will witness an uptick, with LTGC rising to 12.5% and STCG to 20% for equity funds, effective from July 23, 2024.

The Finance Minister also declared that these tax hikes will extend to long-term gains from various financial and non-financial assets. Additionally, the holding period for the calculation of LTCG on several funds has been reduced from 36 months to 24 months, thereby making more investments eligible for long-term capital gains tax.

Investors need to comprehensively understand these taxation changes, as they will influence the overall returns from mutual fund investments. For equity-oriented mutual funds, the higher tax rates will likely reduce returns. Conversely, funds previously taxed based on income slabs will benefit from the lower fixed LTCG rate, particularly overseas and gold mutual funds.

(With inputs from agencies.)