Archive · 16 Sep 2026
Mutual Fund Portfolios Can Change Capital Gains Tax Bills
Two mutual funds can have the same category name but different tax bills.
This happens because tax rules look at what a fund actually owns.
A fund usually needs at least 65% in listed Indian shares to receive equity-fund tax treatment.
Some debt-heavy funds are taxed according to the investor’s income-tax slab.
Other funds, such as some gold, international and hybrid funds, can have different holding-period rules.
A fund’s tax status can change if its portfolio changes.
The change itself does not create a tax bill, but redemption does.
Investors should check the fund’s recent portfolio reports, not only its stated investment plan.
Mutual funds in the same SEBI category can face different capital-gains taxes because classification depends on actual portfolio holdings.
Equity-oriented funds generally require at least 65% in listed Indian shares and attract 20% short-term and 12.5% long-term capital-gains tax above ₹1.25 lakh after 12 months.
Specified mutual funds with more than 65% in debt or money-market instruments are taxed at the investor’s slab rate for units bought from 1 April 2023.
Gold, silver, international and certain hybrid funds may fall into the “other funds” category, with different 12-month or 24-month holding-period rules.
Investors should review a scheme’s factsheet and 12 months of portfolio disclosures because annual-average allocations determine tax status at redemption.
- Who
- Mutual fund investors, fund managers and tax experts including Sougata Basu, Harsh Vardhan Dawar and Rohan Goyal.
- What
- The article explains why mutual funds in the same SEBI category may receive different capital-gains tax treatment based on their actual portfolios.
- When
- The relevant holding period is measured until redemption; rules for units bought from 1 April 2023 apply to specified mutual funds, and the article says the framework is set out in the Income-tax Act, 2025 from 1 April 2026.
- Where
- India.
- Why
- Tax classification depends on prescribed annual-average portfolio allocations, rather than only a scheme’s SEBI category or investment mandate.
- Equity threshold
- At least 65% in shares of Indian companies listed on a recognised stock exchange.
- Equity short-term tax
- 20% on gains when equity-oriented units are held for 12 months or less.
- Equity long-term tax
- 12.5% on gains above ₹1.25 lakh after more than 12 months.
- Specified mutual funds
- More than 65% in debt or money-market instruments; units bought from 1 April 2023 are taxed at slab rates regardless of holding period.
- Other funds
- Includes gold, silver, international and certain hybrid funds; long-term treatment generally begins after 24 months for unlisted units and 12 months for listed units.
- Portfolio test
- Equity status uses the annual average of monthly averages, while specified-fund status uses the annual average of daily closing figures.
- Investor check
- Review the scheme information document, factsheet and 12 months of monthly portfolio disclosures.