Tax Implications on Multi Cap Mutual Funds
When you redeem your Multi Cap Fund units, you must pay Capital Gains Tax on the capital gains you made. In addition, any dividends you earn are subject to Dividend Distribution Tax, or DDT.
1. Dividend Distribution Tax (DDT)
Multi-cap funds are classified as equity-oriented funds under tax regulations if they invest at least 65% of their net assets in equities and equity-related securities. While dividend income from such schemes is taxed at the standard tax rates applicable to investors, it is additionally subject to 10% TDS (Tax Deduction at Source) if the dividend income from mutual funds reaches â‚ą5,000.
2. Capital Gains Tax
A. Short Term Capital Gain Tax (STCG) : If you sell your investments within one year, the profits are categorised as Short-Term Capital profits (STCG) and must be taxed at 15%.
B. Long Term Capital Gain Tax (LTCG) : Whereas every multi-cap investment held for more than a year is taxed as a Term Capital Gain (LTCG). Gains up to one lakh rupees are tax-free in a fiscal year. Gains over one lakh rupees are subject to a 10% tax.