Tax

The Hon’ble Finance Minister presented the Union Budget 2020 on 1st February 2020, which has proposed specific changes to the present income tax rates, which will be applicable for the financial year 2020-21 and subsequently, Finance Act 2020 has also been enacted. However, the new tax rates carry certain caveats before the taxpayers can adopt the reduced rates. As such, both the existing & new tax rate structures will continue to co-exist. 

While creating an investment portfolio, it helps to know the tax incidence of different investments. It is usually advised to compare investments in terms of post-tax returns instead of absolute returns. This article discusses key information related to tax on mutual funds in India.

Below are the provisions on taxation on mutual funds:

A mid-cap fund is a type of an equity mutual fund scheme that invests at least 65% or more of its net assets in the equity shares of mid-cap companies. As per the SEBI (Securities & Exchange Board of India) categorization norms, the companies ranking between 101 to 250 in terms of full market capitalization are classified as mid-cap companies.

Equity Linked Savings Schemes (ELSS) are a special category of equity mutual fund schemes that provide tax benefits to the investors and are commonly known as tax-saving mutual funds. As of 30 June 2021, such funds manage around Rs. 1.36 lakh crores of AUM (Assets Under Management). ELSS funds are reasonably popular amongst retail investors, with 1.28 crore investor folios in such schemes as on that date 

Source: AMFI – Association of Mutual Funds in India