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I have redeemed Mutual Fund units in Franklin India Dynamic Asset Allocation Fund of Funds-Direct-Growth after completing 36 months. What are the LTCG (long term capital gains) tax implications?
Mathew Joseph
The listed mutual funds are treated at par with the listed shares.
Based on the portfolio of investments made by the Franklin India Dynamic Asset Allocation Fund of Funds -Direct -Growth, it would be categorised as a non-equity fund (debt-oriented fund).
Effective April 1, 2023, the gains from debt mutual funds are taxed at slab rates and the same will be considered as short-term capital gain irrespective of the holding period.
Accordingly, the capital gains on redemption of Franklin India Dynamic Asset Allocation Fund of Funds - Direct - Growth shall be subject to tax at the applicable slab rates. No indexation benefits shall be available as it is treated as short-term capital gains.
However, since the investment was made prior to cut-off date of April 1, 2023, this would be taxable as long term capital gain at 20 per cent with indexation benefit.
The author is Partner, Deloitte India
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This article has been updated and republished to correct an error
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