Debt Fund Tax SHIFT! 😱 Will Rs 3 Lakh Profit Cost YOU More in 2025-26? Expert Guide!
Personal Finance
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Updated on 14th November 2025, 4:41 AM
Author
Aditi Singh | Whalesbook News Team
Crux:
New debt fund tax rules from FY 2025-26 are critical. Profits from funds bought before April 1, 2023, held over 24 months, now face 12.5% LTCG tax. Funds bought later are taxed at your income slab rate. Crucially, the new tax regime's Rs 12 lakh rebate WON'T cover these special rates. Understand the old vs. new regime choice for your investments!
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Detailed Coverage:
New tax regulations for debt mutual funds from FY 2025-26 require careful attention.
**Key Changes:** * **Funds Purchased Before April 1, 2023:** If held >24 months, profits (LTCG) are taxed at 12.5%. Shorter holding periods result in STCG taxed at slab rates. * **Funds Purchased On/After April 1, 2023:** All profits are STCG, taxed at your income tax slab rate, regardless of holding period.
**Tax Regime Implications:** The new tax regime's rebate (Section 87A) up to Rs 12 lakh *does not* apply to special tax rates like the 12.5% LTCG on debt funds. The old regime's rebate applies up to Rs 5 lakh.
**Investor Choice:** Investors can choose between old and new tax regimes annually based on total income.
**Impact:** This impacts retail investors in debt funds, requiring updated tax planning strategies. Rating: 7/10
**Difficult Terms Explained:** * **Debt Fund:** Mutual fund investing in fixed-income securities. * **Capital Gains:** Profit from selling an asset. * **STCG:** Short-Term Capital Gains (profit from short holding), taxed at slab rates. * **LTCG:** Long-Term Capital Gains (profit from long holding), taxed at a special rate. * **Tax Regime (Old/New):** Government's tax rules and exemptions. * **Rebate (Section 87A):** A discount on income tax payable. * **Slab Rate:** Income tax rates increasing with income levels.
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