By Niveshkarlo
August 30, 2026
Equity-oriented mutual funds For qualifying equity-oriented mutual funds: – Held up to 12 months: STCG generally taxed at 20% – Held for more than 12 months: LTCG generally taxed at 12.5% – LTCG is taxed only on gains above ₹1.25 lakh in a financial year, subject to applicable conditions.
For eligible equity-oriented mutual fund LTCG, gains up to ₹1.25 lakh in a financial year are exempt from tax. Example: If your eligible LTCG during the year is ₹1,80,000: ₹1,80,000 − ₹1,25,000 = ₹55,000 taxable LTCG At 12.5%, the basic tax would be ₹6,875, before applicable cess and surcharge.
If some mutual fund investments are showing losses, investors may consider whether selling them can help set off eligible capital gains. But don't sell an investment only for tax reasons. Before acting, consider: – Investment objective – Asset allocation – Exit implications – Applicable capital-loss set-off rules – Whether you still want to own the fund
ELSS (Equity Linked Savings Scheme) is a tax-saving mutual fund eligible for deduction under Section 80C, subject to the applicable conditions. SEBI states that ELSS invests at least 80% in equity and equity-related instruments and has a 3-year lock-in, the shortest among Section 80C tax-saving investment options.
For FY 2025–26 onward, the definition of “specified mutual fund” was changed to cover funds investing more than 65% in debt and money-market instruments, along with certain funds investing in such funds. Gains covered by Section 50AA are treated as short-term capital gains, irrespective of the holding period.