Mutual Fund Taxation in India: LTCG, STCG & Debt Fund Rules

Taxes depend on the type of fund and how long you held it. Here's the framework (verify current rates for your assessment year).

Equity funds (≥65% in stocks) - Short-term (held < 1 year): gains taxed as STCG at 20%. - Long-term (held ≥ 1 year): gains above ₹1.25 lakh/year taxed as LTCG at 12.5%; the first ₹1.25 lakh is exempt.

Debt funds Gains are added to your income and taxed at your slab rate, regardless of holding period (for funds bought after the April 2023 rule change).

Hybrid funds Taxed based on their equity allocation — equity-oriented hybrids follow equity rules.

ELSS Equity-taxed, with a bonus: the invested amount qualifies for 80C deduction (up to ₹1.5 lakh). See our ELSS guide.

Practical tips - Holding equity just over a year shifts you from 20% STCG to 12.5% LTCG. - Use the annual ₹1.25 lakh LTCG exemption by booking some gains each year ("tax harvesting").

This is general information, not tax advice — consult a professional for your situation.