Mutual fund tax rules at a glance (FY 2026-27)
| Fund type | Long-term if held over | Long-term tax | Short-term tax |
|---|
| Equity-oriented (65%+ Indian equity) | 12 months | 12.5% above ₹1.25 lakh a year | 20% |
| Debt fund bought on/after 1 Apr 2023 | No long-term benefit | Slab rate | Slab rate |
| Debt fund bought before 1 Apr 2023 | 24 months | 12.5% (no indexation) | Slab rate |
| Hybrid, gold, international, FoF | 24 months | 12.5% | Slab rate |
4% cess is added to the tax. Surcharge applies only for income above ₹50 lakh.
Tips to pay less tax, legally
- Hold equity funds for more than 12 months before selling.
- Use the ₹1.25 lakh exemption every year by booking gains; see the tax harvesting calculator.
- Need a monthly income? An SWP is taxed only on the gain part of each withdrawal.
Units bought before 31 January 2018 have a special "grandfathered" cost for equity funds; use the higher of the actual cost and the 31 January 2018 value (capped at the sale value) as your purchase value.
Frequently asked questions
How are equity mutual funds taxed in FY 2026-27?
Units held for more than 12 months give long-term gains, taxed at 12.5% on the total of such gains above ₹1.25 lakh in the year. Units held for 12 months or less give short-term gains, taxed at 20%. 4% cess is added on the tax.
How are debt mutual funds taxed?
Debt fund units bought on or after 1 April 2023 are taxed at your income tax slab rate however long you hold them. Units bought before that date and held for more than 24 months are taxed at 12.5% without indexation; otherwise at slab rate.
What about hybrid, gold and international funds?
Funds that are neither equity-oriented (at least 65% Indian equity) nor debt funds (over 65% debt) give long-term gains after 24 months, taxed at 12.5%, and short-term gains at slab rate. Rules for some funds bought between April 2023 and March 2025 differ, so check with a tax adviser.
Does this include surcharge?
No. It adds 4% health and education cess. If your total income is above ₹50 lakh, surcharge applies on top. This calculator is a guide; your final tax depends on your full return.