Long-term capital gains (LTCG) refer to profits from selling mutual fund units held for a longer duration, with tax treatment varying between equity and debt mutual funds.

What is Long-Term Capital Gain on Mutual Funds?
LTCG arises when mutual fund units are sold after holding them for:

  • Equity Mutual Funds: Held for over a year.

  • Debt Mutual Funds: Held for over three years.

Tax on LTCG in India

  • Equity Funds: LTCG exceeding ₹1.25 lakh is taxed at 12.5% (no indexation).

  • Debt Funds: Taxed at 20% with indexation, adjusting the purchase price for inflation.

Note: Always consult a tax advisor for the latest tax laws.

Tax Calculation

  • Equity Funds: LTCG = Sale Price - Purchase Price - Sale Expenses

  • Debt Funds: LTCG = Sale Price - Indexed Purchase Price - Sale Expenses (Indexed using the Cost Inflation Index).

Exemptions & Deductions

  • Grandfathering: For equity investments before January 31, 2018, only gains above the highest market price on that date are taxable.

  • Sections 54F & 54EC: Exemptions for reinvesting gains in residential property or specific government bonds.

Who Pays LTCG Tax?

  • Investors earning profits from mutual funds held beyond the specified period, including individuals, HUFs, and companies with mutual fund investments like HDFC Mutual Fund.

Conclusion:
Understanding LTCG tax on mutual funds, especially with funds like HDFC Mutual Fund, is vital for financial planning. Investors should consider tax rates, exemptions, and strategies to optimize returns.

Frequently Asked Questions (FAQs)

Q1. What are Global Funds or International Mutual Funds?
Global funds, also known as international mutual funds, invest in assets such as equities, bonds, and commodities across multiple countries, providing exposure to global markets beyond the investor’s home country.

Q2. How do global funds work?
Global funds work by allocating investments across different countries and regions. Fund managers invest in international stocks, bonds, or global indices, with returns influenced by global economic conditions, currency movements, and geopolitical events.

Q3. What are the different types of global funds?
Global funds include equity global funds (international stocks), debt global funds (global fixed-income securities), global index funds (tracking indices like the MSCI World Index), and sector-specific global funds focusing on particular industries worldwide.

Q4. What are the benefits of investing in global funds?
Investing in global funds offers geographical diversification, access to high-growth international companies, protection against domestic market slowdowns, and potential gains from favorable currency movements.

Q5. Who should consider investing in global funds?
Global funds are suitable for investors seeking diversification, long-term investors with a longer investment horizon, and those with moderate to high risk tolerance who are comfortable with currency and geopolitical risks.

Q6. What risks are associated with global funds?
Global funds are exposed to risks such as currency fluctuations, geopolitical uncertainty, global economic changes, and regulatory differences across countries, which can impact returns.

Q7. How can investors invest in global funds?
Investors can choose global funds based on strategy, region, and past performance, and invest through platforms such as HDFC Mutual Fund, banks, or financial advisors via SIP or lump-sum investments.