Mutual Funds · intermediate

Taxation of Mutual Funds

How gains and payouts from mutual funds are taxed: the three tax groups of funds, short-term and long-term capital gains, IDCW and tax deducted at source, stamp duty, the ELSS deduction and lock-in, and setting off losses (rates as of October 2026).

8 lessonsFact-checked 8 October 2026
  1. 01Tax Treatment — Equity vs Debt vs Hybrid FundsTax law sorts mutual fund schemes into three groups by what they hold: equity-oriented funds, specified mutual funds and all other funds. This lesson explains the tests and what each group means for tax, as of October 2026.
  2. 02Short-Term Capital Gains (STCG) — Rules & RatesA short-term capital gain arises when mutual fund units are sold within the holding period set by tax law. This lesson covers the period and rate for each group of funds, first-in-first-out matching, SIPs and switches, as of October 2026.
  3. 03Long-Term Capital Gains (LTCG) — Rules & Rates (Post Budget 2024)A long-term capital gain arises when mutual fund units are held longer than the period set by tax law. This lesson explains the holding periods, the 12.5% rate, the ₹1.25 lakh yearly limit and the end of indexation, as of October 2026.
  4. 04Dividend Taxation — How It Changed After 2020Payouts from a mutual fund, once called dividends, are now called Income Distribution cum Capital Withdrawal (IDCW). This lesson explains what a payout is, how its taxation changed on 1 April 2020, and how tax is deducted at source, as of October 2026.
  5. 05Stamp Duty on Mutual Fund TransactionsStamp duty of 0.005% is charged when mutual fund units are bought from a fund. This lesson explains which transactions carry it, how it reduces the units allotted without changing the NAV, and how it differs from securities transaction tax.
  6. 06Tax Deducted at Source (TDS) — NRI & Resident RulesTax deducted at source (TDS) is tax a fund house holds back from a payment and deposits with the government for the investor. This lesson sets out when it applies to residents and non-residents and how it is adjusted later, as of October 2026.
  7. 07ELSS — the Tax Deduction and the 3-Year Lock-inAn Equity Linked Savings Scheme (ELSS) is an equity mutual fund category that carries a tax deduction and a 3-year lock-in. This lesson explains the deduction, the tax regime it depends on, how the lock-in runs and how gains are taxed, as of October 2026.
  8. 08Setting Off Capital Gains & Losses — Practical ExamplesTax law lets a capital loss on mutual fund units be set off against capital gains and, if unused, carried forward. This lesson explains which loss can meet which gain, the eight-year carry-forward and its filing condition, as of October 2026.

Free learning from the Trustner Group. Trustner Academy is an education initiative of the Trustner Group, whose companies work across insurance broking and investment services, with offices in Bangalore, Guwahati, Kolkata, Hyderabad and Mumbai. Everything here is for learning only — it is not advice, a recommendation or an offer of any product. Scenarios are illustrative. Rules and figures change; check the current regulation, scheme document or policy wording before acting on anything.