1. What is Mutual Fund Capital Gains Tax?

Capital gains tax is levied on profits earned from redeeming mutual fund units in India. The tax rate depends on the holding period - Long Term Capital Gains (LTCG) for holdings over 1 year and Short Term Capital Gains (STCG) for holdings under 1 year.

2. How Does the Calculator Work?

The calculator uses the capital gains tax formula:

Where:

• \( Redemption \) — Redemption value of mutual fund units (INR)
• \( Cost \) — Cost of acquisition/purchase price (INR)
• \( Rate \) — 12.5% for LTCG (>1 year) or applicable slab rate for STCG (<1 year)

Explanation: Equity mutual funds held for over 1 year qualify for LTCG tax at 12.5% (with ₹1 lakh exemption), while holdings under 1 year are taxed as STCG at slab rates.

3. Importance of Tax Calculation

Details: Accurate tax calculation helps in financial planning, understanding net returns from investments, and ensuring compliance with Indian tax laws for FY 2025-26.

4. Using the Calculator

Tips: Enter redemption amount and cost of acquisition in INR, select the holding period. Ensure all values are positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between LTCG and STCG?
A: LTCG applies to holdings over 1 year taxed at 12.5%, while STCG applies to holdings under 1 year taxed as per income tax slab rates.

Q2: Is there any exemption for LTCG?
A: Yes, LTCG up to ₹1 lakh per financial year is exempt from tax under Section 112A.

Q3: How is cost of acquisition calculated?
A: For multiple purchases, use First-In-First-Out (FIFO) method to determine cost. Include purchase price and transaction charges.

Q4: Are debt mutual funds taxed differently?
A: Yes, debt funds have different holding period criteria (3 years for LTCG) and tax rates (20% with indexation for LTCG).

Q5: When is the tax payable?
A: Tax on capital gains is payable in the financial year when the redemption occurs and must be reported in your Income Tax Return.