Mutual Fund

The removal of the long-term capital gains (LTCG) tax benefit will cause debt mutual funds to become less appealing.

India’s Finance Minister Nirmala Sitharaman has eliminated the tax advantage that debt mutual funds have over bank fixed deposits (FDs) starting next financial year.

This change in the Finance Bill 2023 has left major mutual fund companies disappointed as it removes the long-term tax benefit that debt fund investors received after three years of investment.

The new changes will take effect from the beginning of FY24, making debt funds equivalent to bank FDs in terms of taxability of maturity proceeds.

This move is likely to increase the popularity of bank FDs over debt funds, particularly among ultra-high net worth and high net worth individuals who may prefer safe havens.

As a result, experts predict a shift from long-term debt funds to equity funds, sovereign gold bonds, bank FDs, and non-convertible debentures in the debt category.

This change also affects other non-equity debt schemes, including gold, international equities, and funds of funds (FoF).

Categories: Mutual Fund

Tagged as: , , , ,

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s