/ Direct Tax

Taxation on income from shares & MF for FY 2024-25

Taxation on income from shares and mutual funds under various sections for FY 2024-25

Taxation on income from shares and mutual funds under various sections for FY 2024-25

Categories of Mutual Funds:

  • Equity-Oriented Funds (EOFs) – >65% investment in equity shares of domestic companies.
  • Specified Mutual Funds – <35% in equity (as per Finance Act 2023) / >65% in debt or debt-oriented FOFs (as per Finance (No.2) Act 2024, applicable from FY 2025-26).
  • Other Mutual Funds – All others not classified above (e.g., Hybrid, Gold ETFs, International FOFs, etc.).

Equity-Oriented Funds (EOFs)

  • STT applicable
  • LTCG: Held >12 months
  • STCG: Held ≤12 months
Investor Type STCG LTCG (above ₹1.25 lakh) Dividend Income Tax TDS on Capital Gains TDS on Dividend
Resident Individuals / HUF 15% (before 23 Jul); 20% (after) 10% (before 23 Jul); 12.5% (after) As per slab Nil 10% (if dividend > ₹5,000/year)
Domestic Companies Same as above Same as above As per slab Nil 10%
NRIs Same as above Same as above (no indexation benefit) 20% 20% or DTAA rate 20% or DTAA

 Specified Mutual Funds

  • Applicable if:
    • Invests <35% in equity (Finance Act 2023), or
    • >65% in debt/MMI (from FY 2025-26)
  • Gains treated as Short-Term Capital Gains irrespective of holding period (Section 50AA)
Investor Type Tax on Gains Dividend Income Tax TDS on Gains TDS on Dividend
Resident Individual / HUF As per slab As per slab Nil 10%
Domestic Companies 15% / 22% / 25% / 30% depending on regime As per slab Nil 10%
NRIs 30% 20% 20% or DTAA 20% or DTAA

Other Mutual Funds (e.g., Debt Funds, Gold ETFs, International FOFs – not EOF or Specified MF)

Investor Type STCG (Held ≤3 yrs / 12/24 months) LTCG (Listed: >12 months; Unlisted: >24 months; before 23 Jul: >36 months) Dividend Income Tax TDS on Gains TDS on Dividend
Resident Individual / HUF As per slab 20% (with indexation before 23 Jul); 12.5% after As per slab Nil 10%
Domestic Companies 15% / 22% / 25% / 30% 20% / 12.5% As per slab Nil 10%
NRIs 30% Listed: 20%; Unlisted: 10%; 12.5% (post 23 Jul) 20% 20% or DTAA 20% or DTAA

 

Section 111A

  • Eligible Assessee: Any Assessee
  • Securities Covered: Equity shares, units of equity-oriented mutual fund, units of business trust
  • Tax on Short-term Capital Gains (STCG):
    • 15% if asset transferred before 23-07-2024
    • 20% if transferred on/after 23-07-2024 (note: this is a new update)
  • Adjustment under Chapter VI-A: ❌ Not allowed
  • Exemption Limit: Only for resident individuals and HUF

 

Section 112A

  • Eligible Assessee: Any Assessee
  • Securities Covered: Equity shares, equity-oriented mutual fund units, units of business trust
  • Tax on Long-term Capital Gains (LTCG):
    • 10% if transferred before 23-07-2024
    • 12.5% if transferred on/after 23-07-2024
      (on gains exceeding ₹1 lakh)
  • Adjustment under Chapter VI-A: ❌ Not allowed
  • Exemption Limit: Only for resident individuals and HUF

 

Section 115A

  • Eligible Assessee: Non-resident and foreign company
  • Tax on Income:
    • 10%-20% on dividend/income
    • 20% on royalty/FTS (fees for technical services)
  • Capital Gains Tax: Not specified
  • Chapter VI-A Deduction: ❌ Not allowed (except under Section 80G for donations in some cases)

 

Section 115AB

  • Eligible Assessee: Overseas financial organizations (offshore funds)
  • Securities Covered: Units of mutual funds purchased in foreign currency
  • Tax on Income: 10%
  • LTCG Tax:
    • 10% if transferred before 23-07-2024
    • 12.5% if on/after 23-07-2024
  • Deduction u/s VI-A: ❌ Not allowed

 

Section 115AC

  • Eligible Assessee: Non-resident
  • Securities Covered: FCCBs, FCEBs, GDRs, etc.
  • Tax on Income:
    • 10% on interest income
    • 10% on dividend income
  • LTCG Tax:
    • Same as above (10% / 12.5% based on date)
  • Chapter VI-A Deduction: ❌ Not allowed

 

Section 115AD

  • Eligible Assessee: Foreign Portfolio Investors (FPIs), Specified Funds
  • Securities Covered:
    • Equity shares, equity-oriented mutual funds, business trusts (except debt-oriented mutual funds)
  • Income Tax Rate:
    • 20% for FPIs,
    • 10% for Specified Funds
  • LTCG Tax:
    • 10% (before 23-07-2024)
    • 12.5% (on/after 23-07-2024 if under section 112A)
    • Else, 10% in other cases
  • STCG Tax:
    • 15% if before 23-07-2024
    • 20% if after 23-07-2024 (if under 111A)
    • Else, 30%

Notes on Indexation & Holding Period Changes:

  • Indexation benefit for LTCG on debt MFs abolished post 1-Apr-2023 for Specified MFs.
  • LTCG holding period revised:
    • EOF: >12 months
    • Listed Other MFs: >12 months (after 23 Jul)
    • Unlisted Other MFs: >24 months (after 23 Jul)
    • If sold before 23 Jul 2024: >36 months

Securities Transaction Tax (STT)

Applicable only on Equity-Oriented Funds:

  • Sale on exchange (delivery based): 0.001%
  • Sale to Mutual Fund (repurchase): 0.001%
  • Non-delivery-based sale: 0.025%

Surcharge Rates on Tax (Add Health & Education Cess @ 4% on tax + surcharge)

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