How to report tax on gains from Equity Mutual Funds in Income Tax Return for AY 2023-24

Tax on gains from Mutual Funds: The due date to file the Income Tax Return (ITR) for AY 2023-24 is July 31, 2023. Taxpayers are required to report all their sources of income in the ITR, including income from equity mutual fund investments.



While mutual funds are taxable just like most other assets where you invest, the tax on the sale of units of mutual funds depends on various factors, such as the type of mutual fund, holding period, capital gains, dividends, and income distribution.



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Experts say that tax is levied on both debt-oriented and equity-oriented mutual funds. However, the tax rates and tax provisions vary depending on the type of mutual fund. There are two taxable categories of mutual funds – equity and non-equity funds.



Before moving on to ways of reporting tax on gains from equity mutual fund investments in ITR, let’s first look at how equity and debt funds are taxed.


Taxation of Equity Mutual Funds

Mutual funds having 65% or more investment in Equity instruments are known as equity funds. If the holding period of your equity fund is up to or less than 1 year, then it is taxed as short-term capital gains. “Irrespective of your applicable slab rate, short-term capital gains are taxed at 15% flat”.




If the holding period of your equity fund is more than 1 year, the gain on the sale of your investment will result in long-term capital gains (LTCG).




However, LTCG up to Rs 1 lakh are exempt from tax. Any gains over Rs 1 lakh per annum are taxable at the rate of 10%, with no indexation benefit.



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Taxation of Debt Funds

Mutual funds having more than 65% debt component are known as debt-oriented funds or hybrid funds.


“If you hold the debt funds for a period of less than 3 years, the gains arising from them are considered short-term capital gains. These short-term capital gains are added to the total other income of the assessee and taxed at the applicable slab rates,”



Before the enactment of the Finance Act 2023, gains from selling debt funds after holding them for 3 years were considered LTCG and taxed at a flat 20% rate after the benefit of indexation. If you sold debt funds in FY 2022-23 then the gains will be considered as mentioned above in the ITR for AY 2023-24.




However, as per The Finance Act 2023, no indexation benefit is available for 100% debt-oriented funds or funds having investment in equity instruments limited to 35%, irrespective of the holding period for investments made on or after 1st April 2023.




Gains arising from debt mutual funds will be added to your taxable income and taxed at the normal tax slab rate. But this will be applicable for FY- 2023-2024 (AY 2024-25).



How to report tax on gains from mutual funds in ITR

If you have received some gains from the sale of equity mutual funds, you should file an ITR.


  • You need to keep Form 26AS/AIS/TIS, Form 16, the interest certificate, and the capital gains statement ready in your hand while filing the ITR.


  • Also, select the appropriate form, like the dividend income quarterly, which shall be disclosed in the ‘Schedule of Other Sources’ in the ITR form.



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  • Similarly, to report tax on long-term capital gains from equity-oriented mutual funds, it must be reported in ‘Schedule 112A’. If you have short-term capital gains, that needs to be reported in Schedule CG.



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Lastly, you should try to file your returns before the due date as not doing so can lead to penalties. You can file ITR through the income tax portal or tax filing companies, where the tax experts can guide you at each step and maximize your savings.