Tax rates by fund type
| Fund | Held up to 12 months | Held longer |
|---|---|---|
| Equity-oriented funds | 20% | 12.5% on gains above ₹1.25 lakh a year |
| Debt funds (over 65% in debt), bought from April 2023 | Your slab rate | Your slab rate, no indexation |
Other funds, such as some hybrid, gold and international funds, follow their own rules. The rates are the same under both regimes.
How a SIP is taxed
Each SIP instalment buys units on its own date, so each one has its own 12-month clock. When you sell, the oldest units are sold first. If you redeem a SIP started 18 months ago, the first 6 months' units are long term and the rest short term.
Using the ₹1.25 lakh each year
Long-term equity gains up to ₹1.25 lakh a year are tax-free. Some investors sell and buy back units each year to use it ("tax harvesting"). Check exit loads and the fund's own rules before you do.
Withdrawing a regular income (SWP)
With a systematic withdrawal plan, only the gain inside each withdrawal is taxed, not the whole amount. That can mean less tax than FD interest, which is taxed in full every year. But returns aren't guaranteed.
FD or debt fund?
Both are now taxed at your slab rate. The difference is timing: FD interest is taxed every year, while a debt fund is taxed only when you sell. FDs up to ₹5 lakh are insured; debt fund values move with interest rates.
Gold
Sovereign gold bonds held to maturity (or redeemed with the RBI after five years) are tax-free on redemption. Sold on the exchange, gains are taxed at 12.5% after 12 months. Digital gold held over 24 months is taxed at 12.5%, and you pay 3% GST when you buy.
Reporting it
Capital gains mean you file ITR-2 (or ITR-3 with business income), unless your only gains are long-term equity gains up to ₹1.25 lakh, which ITR-1 now allows. Our guide to reporting capital gains in your ITR walks through it.
Common questions
How are equity mutual fund gains taxed in FY 2026-27?
20% on gains from units held up to 12 months. 12.5% on long-term gains above ₹1.25 lakh a year, from units held longer.
How is each SIP instalment taxed?
Each instalment has its own holding period, from the date it was invested. When you redeem, the oldest units are sold first.
How are debt funds taxed now?
Units bought on or after 1 April 2023 are taxed at your slab rate whenever you sell, with no indexation.
Is mutual fund tax different in the new regime?
No. Capital gains are taxed at the same rates under both regimes.
Two ways to sort this
Do it yourself
- Download the capital gains statement from your fund house, CAMS or KFintech.
- Split gains into short and long term, and equity and debt.
- Use up to ₹1.25 lakh of tax-free long-term equity gains before 31 March if it suits you.
- Report the gains in ITR-2 (or ITR-1 if only long-term equity gains up to ₹1.25 lakh).
Let an expert do it
We file your return with capital gains, set off losses and carry them forward correctly.
The first chat is freeWork it out for yourself
- SIP: What a monthly investment could grow to.
- Step-up SIP: Grow your SIP every year as your salary grows.
- Lumpsum: What a one-time investment could grow to.
- SWP: A monthly income from your mutual fund corpus.
- STP: Move money into equity funds in steps.
- Mutual fund returns: Returns on your mutual fund investments.
- CAGR: The yearly growth rate of an investment.
- Compound interest: How compounding grows your money.
- Simple interest: Interest that doesn't compound.
- Return on investment: Your total and yearly return.
- Stock average: Your average price after buying more.
- Bond yield: Yield to maturity on a bond.
- SIP vs FD: Mutual fund SIP or fixed deposit, after tax.
- SIP vs PPF: Equity SIP or PPF, after tax.
- FD vs debt fund: Fixed deposit or debt fund, after tax.
- SGB vs digital gold: Gold bonds or digital gold, after tax.
See what your SIP could grow to.
Open the SIP calculatorSources
- Tax rules for salaried individuals, AY 2026-27, Income Tax Department
- Investor education: how investments grow, and their risks, Securities and Exchange Board of India
- Mutual fund investor information, Association of Mutual Funds in India
- Sovereign Gold Bond Scheme: FAQs, Reserve Bank of India
This guide explains the rules in general. For your own situation, .