Radhika Gupta explains how Budget 2024 impacts your mutual funds investments

Radhika Gupta- Edelweiss MD and CEO- explained the changes that have taken place in the mutual funds following the announcement of Union Budget 2024. She said that before the Budget, mutual funds had different taxation categories as “some mutual funds were taxed as long term and short term, some mutual funds were taxed with marginal rates of taxation and some mutual funds had this concept of indexation. With this Budget, all of this gets simplified and the concept of indexation of goes away.”

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Now you have three categories of taxation, Radhika Gupta shared explaining, “Category one is for equity and mutual funds that have more than 65% equity, they are taxed as capital assets- 20% in the short term and 12 and a half percent in the long term with long term being anything held more than one year.”

Explaining the second category, Radhika Gupta said, “They are funds that hold more than 65% in debt securities and are taxed at the marginal rate with no concept of short term and long term.”

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Third category is the one that does not fit in either category like gold index fund or gold ETF or could be a funds of fund investing in equity fund or an international fund or could be a conservative hybrid or hybrid fund, she said.

“These have a taxation in short term at marginal rate and long term is 12 and a half percent where long term means more than two years,” she added.

What changes in the Union Budget for mutual funds?

Radhika Gupta said that the second category remains unchanged like last year and the third category get a “material benefit” if you are a long term investor although they remain the same in the short term.

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She said, “If you are a long term investor, instead of attracting the marginal rate of taxation, they now attract 12 and a half per cent capital gains tax over a two year long term.”