- earn a dividend and
- have short term or long term capital gains.
- Equity Funds are considered Short Term Capital Assets when held for 12 months or less.
- Debt Funds are considered Short Term Capital Assets when held for 36 months or less.
(These changes are effective 11th July 2014. When Debt Funds are sold on or before 10th July 2014, they will have the same treatment as Equity Funds and be considered short term capital assets if holding period is of 12 months or less).
Now lets see how are Short Term and Long Term Gains taxed on Equity & Debt Funds.
– Short term capital gains on Equity Funds are taxed @ 15% (irrespective of your tax slab)
– Long Term Capital Gains on Equity Funds are not taxable.
– Short term gains on debt funds are added to your total income and taxed as per the slabs applicable to you.
– Long term gains on debt funds effective 11th July are taxed @ 20% with indexation. Any long term gains on debt funds up to 10th July are taxed at 10% without indexation or 20% with indexation whichever is lower.
Note that surcharge and cess will be also applicable, on your total tax payable.