Level 8 • FundSage Academy
Taxes
•Updated for FY 2025-26•By FundSageAI Quantitative Research Team
How mutual fund gains are taxed in India, and the rules that change your after-tax return.
What You Will Learn in This Level
Level 8 provides actionable mutual fund frameworks calibrated for Indian retail investors. Mastering these lessons protects your portfolio from common psychological traps, hidden expense drag, and improper asset allocation.
✓How Capital Gains Are Calculated: Only your gain — redemption value minus purchase cost — is taxed, not the full amount you receive.
✓LTCG vs STCG on Mutual Funds: How long you've held the units — and whether the fund is equity- or debt-oriented — together determine whether a gain is short-term or long-term.
✓Tax-Loss Harvesting Explained: An unrealised loss saves you no tax — you must sell to "harvest" it before it can offset a gain.
✓Indexation Benefit Explained: Indexation is a historical benefit — no mutual fund redemption on or after 23 July 2024 gets it, including debt fund units bought before April 1, 2023.
Lessons in Level 8
1
How Capital Gains Are Calculated
Intermediate · 4 min read
2
LTCG vs STCG on Mutual Funds
Intermediate · 5 min read
3
Tax-Loss Harvesting Explained
Intermediate · 4 min read
4
Indexation Benefit Explained
Intermediate · 4 min read
5
Nomination in Mutual Funds
Beginner · 3 min read
6
Tax on SIP Investments
Intermediate · 4 min read
7
Tax Planning With Mutual Funds
Intermediate · 5 min read
Frequently Asked Questions: Taxes
Is tax deducted automatically when I redeem?
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For most resident Indian investors, mutual funds don't deduct TDS on capital gains from equity or debt fund redemptions — you're responsible for calculating and paying the applicable tax when filing your income tax return. (NRIs are subject to TDS rules, which differ.)
Where can I find my purchase cost and dates for tax calculation?
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Your Consolidated Account Statement (CAS) lists every transaction with its date and amount, which is the standard source used to calculate capital gains — FundSageAI's CAS tools can also help organise this.
Does the tax rate depend on how long I held the units?
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Yes — mutual fund capital gains are classified as either long-term (LTCG) or short-term (STCG) depending on the holding period, and each is taxed differently; see LTCG vs STCG on Mutual Funds for the full breakdown.
Does switching between funds within the same AMC count as a sale for tax purposes?
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Yes — switching from one scheme to another (even within the same fund house) is treated as a redemption of the first scheme and a fresh purchase of the second, meaning capital gains tax applies on the switch, not just on a withdrawal to your bank account.
Why does the holding period threshold differ between equity and debt funds?
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Tax rules classify funds based on their underlying asset allocation — equity-oriented funds (with high equity exposure) have historically had a shorter LTCG threshold than debt-oriented funds, reflecting different tax policy treatment for each asset class over time.