Lesson 19 of 50 for advisers · The fund tax clients ask about · 5 min read · Reviewed 13 Nov 2026
Equity-oriented fund units held over 12 months: 12.5% on long-term gains above ₹1.25 lakh a year (section 198, was 112A). Held 12 months or less: 20% (section 196, was 111A). Debt funds bought from 1 Apr 2023: taxed at slab, whatever the holding period (section 76, was 50AA). Hybrids in between: 12.5% after 24 months.
An equity-oriented fund holds at least 65% in listed Indian shares. Units held over 12 months are long-term: gains above ₹1.25 lakh a year are taxed at 12.5% under section 198 (112A of the 1961 Act).
Units held 12 months or less are short-term and taxed at 20% under section 196 (111A).
A specified mutual fund holds more than 65% in debt and money market instruments. Units bought from 1 Apr 2023 are always short-term and taxed at the investor’s slab, under section 76 (50AA).
Funds in between, such as those with 35% to 65% in equity, are long-term after 24 months and taxed at 12.5% under section 197 (112). Short-term gains on them are taxed at slab.
Key idea: Fund payouts above ₹10,000 a year from one fund house carry 10% TDS for residents.
Try the short quiz on this page to check what stuck.
0.001% of the value, paid by the seller, on equity-oriented fund units sold back to the fund.
For a resident individual or HUF, unused basic exemption is set off against long-term equity gains first.
On 13 Nov 2026 against incometaxindia.gov.in. Check the latest Budget before a client files.
For learning only, not investment advice. Built in India by a team that tracks its own money on Reva.