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Budget 2024: How will international, debt and gold/silver funds get taxed going forward?

This article shows you how debt, international and gold/silver mutual funds will get taxed as per the new capital gains tax declared in the Union Budget 2024.

Budget 2024: How will international, debt and gold/silver funds get taxed going forward?


Posted on 25 Jul 2024
Author: Sayan Sircar
Tags: Tags Budget ;  Mutual Funds ;  Tax
9 mins read
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This article shows you how debt, international and gold/silver mutual funds will get taxed as per the new capital gains tax declared in the Union Budget 2024.

Budget 2024: How will international, debt and gold/silver funds get taxed going forward?

This article is a part of our detailed article series on Union Budget 2024. Ensure you have read the other parts here:

📚 Topics covered:

What did Union Budget 2024 change about taxes on international, debt and gold/silver funds?

Budget 2024 made a change to Income Tax Section 50AA covering the taxation of “specified mutual funds,” which would be taxable at slab:

  • Old definition as per Budget 2023: funds holding no more than 35% in domestic equity (or equivalent equity arbitrage position)
  • New definition as per Budget 2024: funds holding 65% or more in debt and money market instruments or a fund that holds 65% or more in a fund that holds 65% or more in debt and money market instruments

This change, effective 1st April 2026, will exclude international and gold/silver from the taxation at slab rule that caused a lot of consternation in Budget 2023.

Source: Page 34 of the Finance Bill 2024

Which funds are affected by the change in Section 50AA in Union Budget 2024?

Types of assets to which this rule change applies:

  • Gold/silver Mutual Funds and ETFs or Gold/Silver Fund of Funds
  • International Funds including Fund of Funds
  • India-listed ETFs that invest in international stocks

Other funds affected by this rule change, and therefore no longer taxed at slab for LTCG, are:

  • Domestic Fund of Funds investing in various combinations of equity / debt mutual funds and ETFs
  • Domestic Multi-Asset Funds that invest in stocks, bonds, gold, etc., in one fund

Union Budget 2024 rules do not apply to units sold before 1st April 2024. We are therefore discussing units sold after 1st April 2024 only. We need to keep in mind that the Union Budget 2024 applies only from 23-Jul-2024. Therefore, any units already sold between 1st April 2024 to 22nd July 2024 will be taxed at the old rates. The rates image is a screenshot of the AMFI tax page as on 25th July 2024.

Before going into international and gold/silver funds, we will review the changes of Union Budget 2024 on debt funds.

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What will be the taxation of debt funds as per Union Budget 2024?

For units bought before 1st April 2023

Any units sold between 1st April 2024 to 22nd July 2024 will be taxed at:

  • 20% with indexation for units older than 3 years (this is LTCG)
  • Slab rates for units newer than 3 years (this is STCG)

Any units sold between 23rd July 2024 to 31st March 2025 will be taxed at:

  • 12.5% without indexation for units older than 2 years (this is LTCG)
  • Slab rates for units newer than 2 years (this is STCG)

For units bought after 1st April 2023

Any units sold between 1st April 2024 to 31st March 2025 will be taxed slab rates irrespective of purchase date and holding period.

We will now see the taxation rule change due to change in Section 50AA definition on international and gold/silver funds.

What will be the taxation of international and gold/silver funds as per Union Budget 2024?

For units bought before 1st April 2023

Any units sold between 1st April 2024 to 22nd July 2024 will be taxed at:

  • 20% with indexation for units older than 3 years (this is LTCG)
  • Slab rates for units newer than 3 years (this is STCG)

For units bought after 1st April 2023

Any units sold between 1st April 2024 to 22nd July 2024 will be taxed slab rates irrespective of purchase date and holding period.

However, due to the 1st April 2026 date for Section 50AA, any units sold between 23rd July 2024 to 31st March 2025 will also be taxed slab rates irrespective of purchase date and holding period.

Only when these units will be sold on or after 1st April 2025, will the tax rate be:

  • 12.5%, no ₹1.25 lakhs deduction for units older than 24 months (this is LTCG)
  • slab rate, no indexation for units newer than 24 months (this is STCG)

Note: This is our interpretation of the proposed changes in the Finance Bill 2024. We will update this article if any different viewpoints arise.

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This post titled Budget 2024: How will international, debt and gold/silver funds get taxed going forward? first appeared on 25 Jul 2024 at https://arthgyaan.com


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