Axis Mutual Fund Views – Finance Bill 2023 – Raghav Iyengar, CBO, Axis AMC

Key Takeaways (proposed to be effective from April 01,2023 onwards): –

Investment in mutual funds (where not more than 35 percent is invested in equity shares of domestic companies) that are bought on or after April 1, 2023, will be taxed as short-term capital gains at applicable tax rates. That is, capital gains from debt funds, international funds and gold funds, irrespective of their holding period, will be taxed at an individual’s relevant applicable tax rate.

• Debt mutual funds held for more than 3 years will no longer enjoy indexation benefit
• Additionally, existing LTCG benefits will continue for investments made on or before March 31, 2023.

Conclusion:

With this change debt funds & traditional investments will now see parity in taxation. The comparison between such opportunities will rest largely on performance. One caveat for existing investors through this news flow remains, that of existing investments in debt funds, international funds and gold funds, and even new investments made in them until March 31, 2023, will not be affected by the proposed amendments. These investments will continue to attract long-term capital gains taxation once they complete 3 years. Investors could revisit their portfolio and reallocate funds towards debt and global funds to optimize their portfolios.

Sources: Finance Bill 2023, Axis AMC Research