Radhika Gupta, MD & CEO, Edelweiss Mutual Funds
With the announcement of Union Budget 2024, Radhika Gupta, the Managing Director & Chief Executive Officer of Edelweiss Asset Management Limited has given her opinion stating about the simplification of mutual fund taxation in the new regime as the old regime included long-term and short-term taxes. Also stating about the elimination of concept of indexation, she has categorised the taxation in three consecutive groups.
According to her, the first category goes for “equity and mutual funds that have more than 65% equity. They're taxed as capital assets, 20% in the short term, 12.5% in the long term, where the long term is anything for over a year.”
“While the second category is debt mutual funds, which are funds that hold more than 65% in debt securities. They are taxed at the marginal rate of income, regardless of whether they are held for short term and long term. There's no concept of short term and long term there,” she mentions.
Adding to the last category, Radhika stated, “The third category is very interesting. It's stuff that either doesn't fit into the equity category or the debt category. This could be a gold index fund or a gold ETF. This could be a fund of fund that is investing in equity funds. This could be an international fund or this could be some category of conservative hybrid or hybrid funds that don't have more than 65% equity.”
Followed by the categories, these shall have taxation which is long term and short term in nature, as per her statement. Short term has a marginal rate of taxation while long term has 12.5%, referring to more than two years. In conclusion, the debt mutual funds cannot be changed “from last year at marginal rates”.
Radhika suggests, if one is a long-term investor then gold funds, international funds, funder funds gets a ‘material benefit’. On the other hand, short term remains the same however “if you're a long-term investor who's investing for more than two years instead of attracting the marginal rate of taxation with which they attracted after last year's budget they now attract 12.5% capital gains tax over a two year long term.”
