TAX RATES FOR MUTUAL FUND INVESTORS1 AS PER THE FINANCE BILL, 2020

(Subject to enactment of the Finance Bill)

EQUITY ORIENTED FUNDS (Subject to STT3)

Capital Gains Tax
Type of Investor Dividend Income Tax on Distributed TDS on Capital TDS on Dividend
Short Term 2&9
Long Term 2, 9 &12 Income Gains6 Income

Resident Individual As per

15% 10%$ NIL NIL 10%8
/HUF/AOP/ BOI slab rates

Resident
15% 10%$ 30% NIL NIL 10%8
Partnership Firms

Domestic As per
15 % 10%$ NIL NIL 10%8
Companies applicable rates11

As per STCG – 15%2

NRIs4 15% 10% $ NIL 40%2
slab rates LTCG – 10%$12

Foreign STCG – 15%2

15% 10%$ 20% NIL 40%2
Companies LTCG – 10% $12

FPIs 15% 10%$ 20% NIL NIL NIL

OTHER THAN EQUITY ORIENTED FUNDS

Capital Gains Tax2 & 10
Type of Investor Dividend Income Tax on Distributed TDS on Capital TDS on Dividend
Short Term Long Term Income Gains6 Income

Resident As per As per

20%* NIL NIL 10%8
Individual / HUF slab rates slab rates

As per As per
AOP / BOI 20%* NIL NIL 10%8
slab rates slab rates

Domestic 22%11 / 25%11 As per

20%* NIL NIL 10%8
Companies / Firms / 30% applicable rates

STCG – 30%2
As per 20%* (Listed Units) As per LTCG – 20%*2 (Listed Units)
NRIs4 NIL 40%2
slab rates 10% (Unlisted Units)
$5 slab rates
10% (Unlisted Units)
$2 5

STCG – 40%
Foreign 20%* (Listed Units)
40% 20% NIL LTCG – 20%2 (Listed Units) 40%2
Companies4 10%$5(Unlisted Units)
10%$2 (Unlisted Units)5

FPIs 30% 10% 20% NIL NIL NIL

1
It is assumed that the mutual fund units are held as capital assets by the
INCOME TAX RATES FOR INDIVIDUAL / HUF / AOP/ BOI – Existing tax rates
investors* With indexation$ Without indexation
2 Total Income Up to 250,001 to 500,001 to 1,000,001
Tax to be deducted at source as per section 196A of the Act [plus applicable 250,000 (a) (b) (d) 500,000 1,000,000 and above
surcharge (refer note 7), if any, and Health and Education Cess at the rate of 4%
on income-tax and surcharge]. Tax Rates (c) NIL 5% 20% 30%

3
Securities Transaction Tax ('STT') is applicable only inrespect of sale of units of
Equity-oriented funds ('EOFs') on a recognised stock exchange and redemption INCOME TAX RATES FOR INDIVIDUAL / HUF – New Tax Regime(e)
of EOFs by the mutual fund. Purchase / sale / redemption of units other than
Total Up to 250,001 to 500,001 7,50,001 10,00,001 12,50,001 15,00,001
EOFs are not subject to STT. to to to to
Income 250,000(d) 500,000 7,50,000 10,00,000 12,50,000 15,00,000
and above
4
Non-resident investors shall be entitled to be governed by provisions of the Tax
NIL 5% 10% 15% 20% 25% 30%
applicable Tax Treaty, which India has entered with the country of residence of Rates (c)
the non resident investor, if that is more beneficial than the provisions of the
Income-tax Act, 1961 ('the Act'), subject to certain conditions. As per section (a)
In the case of a resident individual of the age of 60 years or more but less than
90(4) of the Act, a non-resident shall not be entitled to claim treaty benefits, 80 years, the basic exemption limit is INR 300,000.
unless the non-resident obtains a Tax Residency Certificate of being a resident
In the case of a resident individual of the age of 80 years or more, the basic
(b)
of his home country. Further more, as per section 90(5) of the Act, non-resident
exemption limit is INR 500,000.
is also required to provide such other documents and information, as prescribed
by CBDT, as applicable.
(c)
Plus, surcharge on income-tax, as applicable (Health and Education cess is
5
applicable at the rate of 4% on income-tax and surcharge.)
As per section 112 of the Act, long-term capital gains in case of non-residents
would be taxable @ 10% on transfer of capital assets, being unlisted securities, Rebate of up to INR 12,500 available for resident individuals whose total
(d)

computed without giving effect to first and second provision to section 48 i.e. incomedoes not exceed INR 500,000.
without taking benefit of foreign currency fluctuation and indexation benefit. Section 115 BAC is proposed to be inserted wherein an option has been
(e)

6
As per provisions of Section 206AA of the Act, if there is default on the part of a provided to pay tax at the above tax rates subject to the condition that certain
non-resident investor (entitled to receive redemption proceeds from the Mutual exemptions/ losses/ deductions cannot be claimed. In case, the taxpayer intends
Fund on which tax is deductible under Chapter XVII of the Act) to provide its to claim deductions / exemptions, the existing tax rates and slabs will continue to
Permanent Account Number, the tax shall be deducted at higher of the following apply.
rates: i) rates specified in relevant provisions of the Act; or ii) rate or rates in force; Other Additional Points
or iii) rate of 20%. However, the provisions of section 206AA of the Act shall not
Tax can be withheld at a lower rate if a certificate to that effect is obtained by
apply, if the requirements as stated in Rule 37 BC of the Income-tax Rules, 1962,
the non-resident from the assessing officer.
are met.
7 “Infrastructure debt fund" (‘IDF’) means a infrastructure debt fund as defined in
Surcharge Rate as a percentage of Income-tax
clause 1 of the regulation 49L of the Securities and Exchange Board of India
Income > Income > Income >
Type of Investor Income < Income > (Mutual Fund) Regulations, 1996. As per clause 1 of regulation 49L , an
50 Lac 50 Lac but 1 Cr but <= 2 Cr but <= 5 Cr
<= 1 Cr 2 Cr 5 Cr 'infrastructure debt fund scheme' would mean, a scheme which invests primarily
Individual, HUF, AOP (minimum 90% of scheme assets) in debt securities or securitized debt instrument
NIL 10% 15% 25% 37%&
(Resident & Foreign) of infrastructure companies or infrastructure capital companies or infrastructure
Income < Income >1Cr Income > projects or special purpose vehicles, etc or other permissible assets in accordance
1 Cr but <= 10 Cr 10 Cr
with these regulations or bank loans in respect of completed and revenue
Partnership firm
NIL 12% 12% - - generating projects of infrastructure companies or projects or special purpose
(Domestic & Foreign)
vehicles.
Domestic Company NIL 7% 12% - -
Where the total income as reduced by short-term capital gains is below the
Domestic Company maximum amount which is not chargeable to income-tax, then, such short-term
(opting for new 10% 10% 10% - -
tax regime)
capital gains should be reduced by the amount by which the total income as so
reduced falls short of the maximum amount which is not chargeable to
Foreign Company NIL 2% 5% - -
income-tax and the tax on the balance of such short-termcapital gains should
8 be computed at the rate of 15 per cent.
There shall be no TDS where the aggregate payment does not exceed INR 5,000
during a year to a single investor. The capital gains on transfer of units should not be reduced from the book
9 profits while calculating the MAT liability
Capital gains arising on the transfer or redemption of equity-oriented units held
for a period of more than 12 months, immediately preceding the date of transfer, In case of non-residents, as per provisions of section 115A dividend income
should be regarded as 'long-term capital gains'. should be subject to tax at the rate of 20%. However, the withholding tax
10 provisions require tax to be withheld at rates in force, there seems to be an
Capital gains a rising on transfer or redemption of other than equity-oriented
anomaly here and we are of the view that a clarification/ amendment to the
units should be regarded as long-term capital gains, if such units are held for a
language would be provided.
period of more than 36 months immediately preceding the date of such transfer.
11
For Domestic Companies, Tax shall be levied at 25% for the financial year
2020-21, if the total turnover or gross receipts of the financial year 2018 -19 does
not exceed INR 400 crores. If a company decides to opt for the new taxation
regime as per the Taxation Law Amendment Act, 2019, then tax shall be levied at
the rate of 22%.
12
As per section 112A of the Act, long-term capital gains on transfer of units of
equity oriented mutual funds exceeding INR 100,000 would be taxable at the
rate of 10% without giving effect to first and second proviso to section 48 i.e.
without taking benefit of foreign currency fluctuation and indexation benefit.
Further, cost of acquisition to compute long - term capital gains is to be higher
of (a) Actual cost of acquisition; and (b) Lower of (i) fair market valueas on 31
January 2018; and (ii) full value of consideration received upon transfer
&
The higher rate of surcharge i.e. 25% and 37% should not be applicable on
short term and long term capital gains earned on transfer of units of equity
oriented mutual funds which are subject to STT

As proposed by Finance Bill, 2020