Tax Rates Specific to Mutual Funds
The rates are applicable for the financial year 2024-25 as per Finance Act, 2024.
Tax Implications on Income Distribution under Income Distribution cum Capital Withdrawal(IDCW) Option received by Unitholders.
According to SEBI circular no. SEBI/HO/IMD/DF3/CIR/P/2020/194 dated October 05, 2020, there was a change in the nomenclature of Dividend to Income Distribution cum Capital Withdrawal(IDCW) available across all the plans offered by the schemes of the Fund with effect from April 01, 2021. The Finance Act, of 2020 abolished income distribution tax and instead introduced taxing of income from mutual fund units in the hands of the unit holders.
| Income Distributed by a Mutual Fund | |||
| IDCW | Individual/HUF | Domestic Companies | NRI |
| Equity oriented schemes | At applicable slab rates~ | 30%^^/25%^^^/22%^^^^/15%^^^^^ | At applicable slab rates~ |
| Other than Equity oriented schemes | At applicable slab rates~ | 30%^^/25%^^^/22%^^^^/15%^^^^^ | At applicable slab rates~ |
| ~ Kindly refer to Income Tax rates for the applicable rates in the case of individuals. | |||
Further, tax needs to be deducted at source as detailed below:
| Type of Investor | Withholding Tax rate | Section |
| Resident@ | 10%* | 194K |
| NRI/FPI | 20% or rate as per applicable tax treaty*** (whichever is lower) | 196A***/196D**** |
* Tax is not deductible if income in respect of units of a mutual fund is below ₹ 5,000 in a financial year. However, on account of practical difficulties involved due to the unique nature of mutual fund investments and the different schemes involved, Sundaram Mutual Fund shall deduct TDS from each dividend declared once it exceeds the Rs. 4,000 threshold benefit on a cumulative basis in a Financial year (Consolidate on PAN basis). In case the total TDS exceeds the actual tax liability of any investor, he/she can claim a refund while filing an income tax return.
TDS will not be deducted in the following cases
- The resident individual (not being a company or firm) can submit Form No. 15G to Mutual Fund for non-deduction of TDS under section 194K of the Act provided that the tax on his estimated total income (including such income received from Mutual Fund) of the financial year is NIL and the aggregate income shall not exceed the maximum amount which is not chargeable to tax.
- Form 15H is to be submitted by a resident individual (aged 60 years or more) for non-deduction of TDS under section 194K of the Act provided that the tax on his estimated total income (including such income received from Mutual Fund) of the financial year is NIL.
- Certificate from ITO for lower deduction/NIL deduction of TDS under section 197,
- Entities falling under Circular 18/2017 dated 29th May 2017.
The Form 15G or Form 15H or Certificate from ITO should be submitted on an annual basis at the start of the financial year at any of the Official Points of Acceptance of Sundaram Mutual Branch or customer care center of KFin Technologies Pvt Ltd.
It may be noted that exemption from tax deduction will be granted only from the date of receipt of Form 15 G or Form 15H or Certificate from ITO and any tax deducted and remitted to the government on or before that date cannot be refunded under any circumstances.
Fresh Form 15G or Form 15H is to be submitted again when there is a change in the estimated total income already declared, even though the investors might have already furnished the forms for the current financial year.
**The base tax is to be further increased by a surcharge at the rate of:
- 37% on base tax where total income exceeds ₹ 5 crore;
- 25% where total income exceeds ₹ 2 crore but does not exceed ₹ 5 crore;
- 15% where total income exceeds ₹ 1 crore but does not exceed ₹ 2 crore; and
- 10% where total income exceeds ₹ 50 lakhs but does not exceed ₹ 1 crore
- In case the investor is opting for the ‘New Regime’ as mentioned on page 3, the rate of surcharge is not to exceed 25%. Further, “Health and Education Cess” is to be levied at 4% on aggregate of base tax and surcharge.
***Tax treaty benefits can be claimed subject to fulfillment of stipulated conditions as well as interpretation of Article of the relevant tax treaty.
****As per the provisions of section 196D of the Act which is specifically applicable in the case of FPI/FII, the withholding tax rate of 20% (plus applicable surcharge and cess) on any income in respect of securities referred to in section 115AD(1)(a) credited/paid to FII shall apply. The Finance Act, 2021 inserted a proviso to section 196D(1) of the Act to grant relevant tax treaty benefits with effect from 1 April 2021 at the time of withholding tax on income with respect to securities of FPIs, subject to furnishing of tax residency certificate and such other documents as may be required. As per section 196D(2) of the Act, no TDS shall be made in respect of income by way of capital gain arising from the transfer of securities referred to in section 115AD of the Act.
@ Non-linking of PAN with Aadhaar – As per section 139AA of the Income Tax Act, 1961 (‘the Act’) read with rule 114AAA of the Income-tax Rules, 1962, in the case of a resident person, whose PAN has become inoperative due to PAN – Aadhaar not being linked on or before 30 June 2023 or as extended by Govt., it shall be deemed that he has not furnished the PAN and tax could be withheld at a higher rate of 20% as per section 206AA of the Act. For linking PAN with Aadhaar after 31 March 2022, fees of Rs. 500 till 30 June 2022 and Rs. 1,000 till 31 March 2023 has been prescribed.
| Capital Gain Taxation | |||
| Individual/HUF | Domestic Company | NRI | |
| Equity Oriented schemes | |||
| Long Term Capital gain ((Units held for more than 12 months) | 12.5%**### | 12.5%**### | 12.5%**### |
| Short Term Capital Gains (Units held for 12 months or less) | 20%& | 20%& | 20%& |
** – On LTCG amount exceeding Rs. 1,25,000; ###- 10% for transfer that takes place before 23.07.2024; &-15% if the transfer takes place before 23.07.2024
| Long-Term Capital gain a) Units held for more than 36 months – If transferred before 23 July 2024, b) More than 12 months for listed units and 24 months for unlisted units – If transferred on or after 23 July, 2024 | |||
| Short-Term Capital Gains a) Units held for less than or equal to 36 months – If transferred before 23 July, 2024, b) Less than or equal to 12 months for listed units and 24 months for unlisted units – If transferred on or after 23 July, 2024) | 12.5%@@(without indexation) | 12.5%@@(without indexation) | Listed – 12.5%@@ (without indexation) Unlisted – 12.5%$$$ (without indexation) |
| Short Term Capital Gains a) Units held for less than or equal to 36 months – If transferred before 23 July, 2024, b) Less than or equal to 12 months for listed units and 24 months for unlisted units – If transferred on or after 23 July, 2024) | 30%^ | 30%^^/25%^^^/22%^^^^/ 15%^^^^^ | 30%^ |
| Specified Mutual Fund$$ Other than Equity Oriented Schemes | |||
| Short Term Capital Gains | 30%^ | 30%^^/25%^^^/22%^^^^/ 15%^^^^^ | 30%^ |
| Tax Deducted at Source (Applicable only to NRI Investors) | ||
| Long-term capital gains | Long term capital gains | |
| Equity Oriented Scheme | 20%& | 12.5%**### |
| Other than Specified Mutual Funds & other than Equity Oriented Schemes | 30% | Listed – 12.5%@@ Unlisted – 12.5%$$$ |
| Specified Mutual Fund Other than Equity Oriented Schemes | 30% | |
$ Surcharge to be levied at:
- 37% on base tax where specified income** exceeds Rs. 5 crore;
- 25% where specified income** exceeds Rs. 2 crore but does not exceed Rs. 5 crore;
- 15% where total income exceeds Rs. 1 crore but does not exceed Rs. 2 crore; and
- 10% where total income exceeds Rs. 50 lakhs but does not exceed Rs. 1 crore.
In case total income includes income by way of dividends on shares and short-term capital gains on units of equity-oriented mutual fund schemes and long-term capital gains on mutual fund schemes, the rate of surcharge on the said type of income is not to exceed 15%. In case an investor is opting for ‘New Regime’ the rate of surcharge is not to exceed 25%.
** Specified income – Total income excluding income by way of dividend on shares and short-term capital gains on units of equity-oriented mutual fund schemes and long-term capital gains on mutual fund schemes.
Further, Health and Education Cess is to be levied at the rate of 4% on the aggregate of base tax and surcharge.
$$ As per amendment to Finance Bill, 2023 gains arising on transfer, redemption, or maturity of specified mutual funds acquired on or after 1 April 2023 will deemed to be ‘short-term capital gains’ (regardless of the period of holding). Specified mutual fund means a mutual fund by whatever name called, where not more than 35% of its total proceeds are invested in the equity shares of domestic companies. The definition of the “specified mutual fund” is proposed to be amended from FY 2025-26 as (a) a Mutual fund that invests more than 65 percent of its total proceeds in debt and money market instruments; or (b) a fund that invests 65 percent or more of its total proceeds in units of a fund referred to in above sub-clause (a).
@ Surcharge at the rate of 7% is levied for domestic corporate unit holders where the income exceeds ₹ 1 crore but less than ₹ 10 crore and at the rate of 12%, where income exceeds ₹ 10 crores. However, the Taxation Laws (Amendment) Ordinance, 2019 provides for a surcharge at a flat rate of 10 percent on base tax for the companies opting for a lower rate of tax of 22%/15%.
# Short-term/long-term capital gain tax (along with applicable Surcharge and “Health and Education Cess”) will be deducted at the time of redemption/switches of units in case of NRI investors only. Tax treaty benefits can be claimed for withholding tax on capital gains subject to fulfillment of stipulated conditions.
## The base year for indexation purposes has been shifted from 1981 to 2001 to calculate the cost of acquisition or to take the fair market value of the asset as of that date. Further, it provides that the cost of acquisition of an asset acquired before 1 April 2001 shall be allowed to be taken as fair market value as of 1 April 2001.
^ Assuming the investor falls into the highest tax bracket.
^^ This rate applies to companies other than companies engaged in manufacturing business who are taxed at a lower rate subject to fulfillment of certain conditions.
^^^ If total turnover or gross receipts during the financial year 2020-21 does not exceed ₹ 400 crores.
^^^^ This lower rate is optional and subject to fulfillment of certain conditions as provided in section 115BAA.
^^^^^ This lower rate is optional for companies engaged in manufacturing business (set up & registered on or after 1 October 2019) subject to fulfillment of certain conditions as provided in section 115BAB.
+ Securities Transaction Tax ( STT ) will be deducted on equity-oriented funds at the time of redemption / switch to other schemes/sale of units. @@ At the rate of 20% (with indexation) if the transfer takes place before 23.07.2024.
$$$ At the rate of 10% (without indexation) if the transfer takes place before 23.07.2024.
Further, Minimum Alternate Tax (MAT) applicable to domestic companies (except for those who opt for a lower rate of tax of 22%/15%) are not considered in the above tax rates. Special provision for deduction of tax at source for non-filers of income-tax return -Tax to be deducted at twice the applicable rate in case of payments to a specified person (except non-resident not having a permanent establishment in India) who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted, for which time limit for filing return has expired and the aggregate of tax deducted at source in his case is Rs. 50,000 or more in the said previous year. Additionally, if provisions of section 206AA are also applicable then tax is to be deducted at the higher of the two rates provided i.e. rate as per section 206AB or section 206AA.
Merger: Transfer of units upon consolidation of mutual fund schemes of two or more schemes of an equity-oriented fund or two or more schemes of a fund other than an equity-oriented fund in accordance with SEBI (Mutual Funds) Regulations, 1996 is exempt from capital gains. The Finance Act, 2016 provides tax exemption to unit holders vis-à-vis transfer of units upon consolidation of the plans within a scheme of mutual fund in accordance with SEBI (Mutual Funds) Regulations, 1996
General Anti Avoidance Rule (‘GAAR’): GAAR provisions are applicable w.e.f. 1 April, 2017. The objective is to deny tax benefits to an arrangement that has been entered into with the main purpose of obtaining tax benefits and which lacks commercial substance or creates rights and obligations that are not at arm’s length principle or results in misuse of tax law provisions or is carried out by means or in a manner which is not ordinarily employed for bona fide purposes. The over-arching principle of GAAR provisions is “substance over form”. The tax rates provided above are for general information only. Investors are advised to seek the opinion of their tax consultant.
What is an Income Tax Slab?
In India, the Income Tax applies to individuals based on a slab system, where different tax rates are assigned to different income ranges. As the person’s income increases, the tax rates also increase. This type of taxation allows for a fair and progressive tax system in the country. The income tax slabs are revised periodically, typically during each budget. These slab rates vary for different groups of taxpayers.
Changes made to New Tax Regime in Budget 2024
- Revised Slabs: The slabs have been revised in the new regime
- Enhanced Standard Deduction: The standard deduction for salaried employees has been increased to Rs. 75,000 under the new regime
- Family Pension: The deduction on family pension received has been increased from Rs. 15,000 to Rs. 25,000
- NPS Contribution: The deduction limit on the employer’s contribution to NPS has been increased to 14% from 10%
As a result of the above changes, a salaried employee in the new tax regime can save up to Rs. 17,500 in taxes.
Income Tax Slabs for FY 2024-25 (AY 2025-26)
The Budget 2024 introduced significant changes to the tax slabs under the New Tax Regime, which will be applicable for FY 2024-25 (AY 2025-26). Taxpayers can now benefit from revised tax slabs, along with an increased standard deduction and an enhanced family pension deduction.
Here’s a breakdown of the revised income tax slabs for FY 2024-25 under the new regime:
| Tax Slab for FY 2023-24 | Tax Rate | Tax Slab for FY 2024-25 | Tax Rate |
|---|---|---|---|
| Up to ₹ 3 lakh | NIL | Up to ₹ 3 lakh | NIL |
| ₹ 3 lakh – ₹ 6 lakh | 5% | ₹ 3 lakh – ₹ 7 lakh | 5% |
| ₹ 6 lakh – ₹ 9 lakh | 10% | ₹ 7 lakh – ₹ 10 lakh | 10% |
| ₹ 9 lakh – ₹ 12 lakh | 15% | ₹ 10 lakh – ₹ 12 lakh | 15% |
| ₹ 12 lakh – ₹ 15 lakh | 20% | ₹ 12 lakh – ₹ 15 lakh | 20% |
| More than 15 lakh | 30% | More than 15 lakh | 30% |
Key Features of the New Income Tax Regime for FY 2024-25
The key features of the new tax regime for FY 2024-25 is as follows:
- Default tax regime: It is the default tax regime. If individuals want to choose the old regime then they have to file Form 10-IEA.
- Basic exemption limit: The basic exemption limit is Rs. 3 lakhs for everyone irrespective of their age.
- Rebate u/s 87A: Rebate u/s 87A is available to individual taxpayers if their income is up to Rs. 7 lakhs. Hence, they will have zero tax liability if their income is under Rs. 7 lakhs.
- Surcharge: The highest surcharge rate is 25% under the new regime as opposed to 37% in the old regime.
Income Tax Slab Rates For FY 2024-25 (AY 2025-26)
a. New Tax regime until 31st March 2025
| Tax Slab for FY 2023-24 | Tax Rate |
| Upto 3,00,000 | Nil |
| 3,00,001 – 7,00,000 | 5% |
| 7,00,001 – 10,00,000 | 10% |
| 10,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| Above 15,00,000 | 30% |
* Tax rebate up to Rs.25,000 is applicable if the total income does not exceed Rs 7,00,000 (not applicable for NRIs).
b. Old Tax regime
Income tax slabs for individuals aged below 60 years & HUF
| Income Slabs | Individuals of Age < 60 Years and NRIs |
| Up to Rs 2,50,000 | NIL |
| Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 to Rs 10,00,000 | 20% |
| Rs 10,00,001 and above | 30% |
NOTE:
- The income tax exemption limit is up to Rs 2,50,000 for Individuals, HUF below 60 years aged, and NRIs.
- Surcharge and cess will be applicable.
Income tax slab for individuals aged above 60 years to 80 years
| Income Slabs | Individuals of Age 60 Years to 80 Years |
| Up to Rs 3,00,000 | NIL |
| Rs 3,00,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 to Rs 10,00,000 | 20% |
| Rs 10,00,001 and above | 30% |
NOTE:
- The income tax exemption limit is up to Rs.3 lakh for senior citizens aged above 60 years but less than 80 years.
- Surcharge and cess will be applicable.
Income tax slab for Individuals aged more than 80 years
| Income Slabs | Individuals of Age above 80 Years |
| Up to Rs 5,00,000 | NIL |
| Rs 5,00,001 to Rs 10,00,000 | 20% |
| Rs 10,00,001 and above | 30% |
NOTE:
- The income tax exemption limit is up to Rs 5 lakh for super senior citizens aged above 80 years.
- Surcharge and cess will be applicable