LTCG on WebNotes

CAMS and KFin capital gains statement for mutual funds

Tue, 12 May 2026 00:00:00 +0000

The CAMS and KFin capital gains statement is a tax computation report generated by the two principal Registrar and Transfer Agents (RTAs) for Indian mutual funds – CAMS (Computer Age Management Services) and KFintech (KFin Technologies) – that computes the capital gain or loss arising from mutual fund unit redemptions during any specified date range. The statement applies the FIFO (first-in, first-out) method to assign purchase costs to each redeemed lot, segregates gains into short-term capital gains (STCG) and long-term capital gains (LTCG), and optionally applies cost indexation for qualifying debt fund holdings. It is the foundational tax document for mutual fund investors preparing to file an income-tax return.

Debt mutual fund indexation removal, Finance Act 2023

Tue, 12 May 2026 00:00:00 +0000

The Finance Act 2023 amended the Income Tax Act, 1961, to remove the indexation benefit and the concessional long-term capital gains (LTCG) tax rate of 20 percent that had previously applied to gains from debt mutual fund schemes held for more than 36 months. With effect from 1 April 2023 (for transactions on or after that date), capital gains from specified debt mutual fund schemes are taxed as short-term capital gains at the investor’s applicable income tax slab rate, irrespective of the holding period. This change fundamentally altered the after-tax return profile of debt mutual funds relative to bank fixed deposits and other fixed-income alternatives, and it significantly reduced the attractiveness of debt funds as tax-efficient long-term investment vehicles for investors in the 30 percent income tax bracket.

Grandfathering of LTCG on equity MFs (31 January 2018)

Tue, 12 May 2026 00:00:00 +0000

Grandfathering of LTCG on equity mutual funds refers to the statutory mechanism under Section 55(2)(ac) of the Income Tax Act 1961 that protects gains accrued on equity-oriented mutual fund units before 1 February 2018 from being taxed under Section 112A. The provision was inserted by the Finance Act 2018 simultaneously with the reintroduction of LTCG tax on equity after a 14-year hiatus. It operates by deeming the cost of acquisition of pre-2018 units to be the higher of the actual purchase price and the fair market value (FMV) of the units on 31 January 2018, subject to an upper cap of the actual sale price. The effect is that all appreciation up to 31 January 2018 is excluded from the taxable LTCG base.

Holding-period statement for mutual funds

Tue, 12 May 2026 00:00:00 +0000

A holding-period statement for mutual fund units is a pre-redemption planning document generated by RTAs (CAMS and KFintech) and available through platforms such as MFCentral, that lists each individual purchase lot held in a folio with its purchase date, purchase NAV, cost of acquisition, number of units in the lot, and the number of days (or months and years) the lot has been held as of the statement generation date. Investors use the holding-period statement to determine which lots of units have crossed the threshold for long-term capital gains (LTCG) treatment and to plan redemptions in a tax-efficient manner.

How to compute LTCG with grandfathering on Zerodha

Tue, 12 May 2026 00:00:00 +0000

When the Finance Act 2018 reintroduced long-term capital gains tax on listed equity and equity-oriented mutual funds under section 112A, it included a grandfathering rule to protect gains accrued before the provision came into force. Under this rule, the cost of acquisition for equity held on 31 January 2018 is deemed to be the Fair Market Value (FMV) on that date if the actual cost is lower, but only to the extent of the sale consideration. This ensures that gains accrued up to 31 January 2018 are not taxed under section 112A.

How to do tax-loss harvesting on Zerodha at year-end

Tue, 12 May 2026 00:00:00 +0000

Tax-loss harvesting is the practice of selling securities that are showing an unrealised loss before the end of the financial year to realise the loss, offset it against capital gains, and reduce the overall tax liability. Under the Income Tax Act 1961 and as amended by the Finance Act 2024, capital gains tax rates on listed equity are 20% for short-term gains (section 111A) and 12.5% on LTCG above Rs 1.25 lakh (section 112A). Harvesting losses before 31 March can meaningfully reduce the taxable gain, particularly for investors who have accumulated significant unrealised losses in a falling market.

How to download the capital gains statement on Zerodha

Tue, 12 May 2026 00:00:00 +0000

The capital gains statement available through Zerodha Console consolidates every equity delivery sale in a financial year, computes the holding period, and maps each gain or loss to the correct section of the Income Tax Act, 1961. The statement is the primary input for Schedule CG and Schedule 112A in ITR-2 or ITR-3. This guide walks through the download procedure, explains the key columns, and flags the Finance Act 2024 rate changes that apply from 23 July 2024.

How to file ITR-2 with Zerodha capital gains

Tue, 12 May 2026 00:00:00 +0000

ITR-2 is the income tax return form for resident individuals and Hindu Undivided Families (HUFs) who have capital gains from equity, debt, or other securities but do not carry on any business or profession. If your Zerodha account has only equity delivery trades and no F&O activity classified as business income, ITR-2 is typically the correct form. This guide walks through the end-to-end filing process for Assessment Year 2025-26 (Financial Year 2024-25) using the capital gains report downloaded from Zerodha Console.

ITR-ready capital gains statement for mutual funds

Tue, 12 May 2026 00:00:00 +0000

The ITR-ready capital gains statement for mutual funds is a tax computation document generated by Registrar and Transfer Agents (RTAs) – principally CAMS and KFintech – as well as by the joint portal MFCentral, that calculates the taxable capital gain or loss arising from mutual fund redemptions during a financial year. The statement applies the first-in, first-out (FIFO) method mandated under Indian income-tax rules, segregates gains into short-term capital gains (STCG) and long-term capital gains (LTCG), and presents the output in a format aligned with Schedule CG of ITR-2 or ITR-3. Investors use this document as the primary tax computation input when filing their annual income-tax return.

LTCG on equity mutual funds (Section 112A)

Tue, 12 May 2026 00:00:00 +0000

Long-term capital gains (LTCG) on equity-oriented mutual funds are taxed under Section 112A of the Income Tax Act 1961 at a flat rate of 12.5% on gains exceeding Rs 1,25,000 per financial year, as revised by the Finance Act 2024 effective 23 July 2024. Section 112A was introduced by the Finance Act 2018 to reimpose LTCG tax on listed equity after a 14-year exemption and is the primary charging section for long-term redemptions of equity mutual fund units, ELSS, balanced hybrid funds, and arbitrage funds that qualify as equity-oriented. Indexation is not available under Section 112A. The grandfathering provision in Section 55(2)(ac) ensures that gains accrued before 1 February 2018 are excluded from the taxable base.

MF switch as a taxable event

Tue, 12 May 2026 00:00:00 +0000

A switch in mutual funds is a taxable event under the Income Tax Act 1961. When an investor switches from one mutual fund scheme to another – or from the regular plan to the direct plan of the same scheme, or from the IDCW option to the growth option – it constitutes a “transfer” within the meaning of Section 2(47) of the Income Tax Act 1961. At the moment of the switch, units in the source scheme are deemed to have been redeemed at the prevailing switching NAV, and new units are allotted in the destination scheme at the same NAV. Capital gains (or losses) crystallise in the source scheme on the switch date, and the holding period for the new units in the destination scheme begins on the switch date.

Section 80C deduction for ELSS

Tue, 12 May 2026 00:00:00 +0000

Equity-Linked Savings Scheme (ELSS) is a category of open-ended equity mutual fund regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Mutual Funds) Regulations 1996. It is the only mutual fund category that qualifies for a tax deduction under Section 80C of the Income Tax Act 1961. An investor may claim a deduction of up to Rs 1,50,000 per financial year on investments in ELSS, subject to the overall Section 80C ceiling. ELSS units carry a statutory lock-in period of three years from the date of allotment of each unit. Upon redemption after the lock-in, any capital gains are long-term capital gains (LTCG) taxed under Section 112A at 12.5% on gains exceeding Rs 1,25,000 per financial year (rates as revised by the Finance Act 2024, effective 23 July 2024).

Taxation of debt mutual funds (post-April 2023)

Tue, 12 May 2026 00:00:00 +0000

Taxation of debt mutual funds in India underwent a fundamental change with effect from 1 April 2023 under the Finance Act 2023. Before that date, debt mutual fund units held for more than 36 months qualified as long-term capital assets and were taxed at 20% with the benefit of indexation under Section 48 of the Income Tax Act 1961. The Finance Act 2023 inserted the third proviso to Section 50AA (later renumbered as applicable amendments in the Schedule), which provides that the capital gains on specified mutual funds – those investing less than 65% of their assets in domestic equity – shall be treated as short-term regardless of the actual holding period, and shall be included in total income and taxed at the investor’s applicable income-tax slab rate. The regime for units acquired on or after 1 April 2023 is now uniformly slab-rate taxation with no indexation and no concept of long-term holding for such funds.

Taxation of equity mutual funds in India

Tue, 12 May 2026 00:00:00 +0000

Taxation of equity mutual funds in India is governed principally by Sections 111A and 112A of the Income Tax Act 1961, with rates last revised by the Finance Act 2024 with effect from 23 July 2024. An equity-oriented mutual fund, as defined under Section 112A(10), is a fund that invests at least 65% of its total proceeds in equity shares of domestic companies. Capital gains on such funds are split into short-term capital gains (STCG) if the units are held for twelve months or less, and long-term capital gains (LTCG) if held for more than twelve months. As of 23 July 2024, STCG is taxed at 20% under Section 111A and LTCG exceeding Rs 1,25,000 per financial year is taxed at 12.5% under Section 112A, without the benefit of indexation. Dividend income distributed by equity funds, renamed Income Distribution cum Capital Withdrawal (IDCW) by SEBI in 2021, is taxed as ordinary income at slab rates.

Taxation of Fund of Funds (revised 2024)

Tue, 12 May 2026 00:00:00 +0000

Taxation of Fund of Funds (FoFs) in India was revised by the Finance Act 2024, effective 23 July 2024, to create a favourable classification for domestic equity FoFs that invest predominantly in equity-oriented domestic mutual funds. Under the pre-2024 framework, all FoFs – regardless of whether they invested in equity or debt underlying funds – were classified as non-equity and taxed either under Section 112 (LTCG with indexation, pre-April 2023) or as specified mutual funds at slab rate (post-April 2023, per Finance Act 2023). The Finance Act 2024 introduced a new sub-category: a domestic equity FoF that invests at least 90% of its assets in equity-oriented domestic mutual funds now qualifies as equity-oriented and is taxed under Sections 111A and 112A like a direct equity mutual fund.

Taxation of gold ETFs and silver ETFs in India

Tue, 12 May 2026 00:00:00 +0000

Taxation of gold ETFs and silver ETFs in India is governed by the same framework as other “specified mutual funds” introduced by the Finance Act 2023. Gold ETFs hold physical gold (or gold-backed instruments); silver ETFs hold physical silver. Neither holds domestic equity, so both fail the 65% equity test and are classified as specified mutual funds. For units acquired on or after 1 April 2023, all capital gains are treated as short-term regardless of holding period and taxed at the investor’s income-tax slab rate. For units acquired before 1 April 2023, gains on units held for more than 36 months are LTCG at 20% with indexation under Section 112.

Taxation of hybrid mutual funds in India

Tue, 12 May 2026 00:00:00 +0000

Taxation of hybrid mutual funds in India is determined primarily by the equity allocation of the fund, which places it into one of three tax buckets: equity-oriented (more than 65% in domestic equity), specified mutual fund (35% or less in domestic equity), or a residual intermediate category that existed briefly before the Finance Act 2023 reforms. Hybrid funds span the spectrum from aggressive hybrid funds (65-80% equity) to conservative hybrid funds (10-25% equity), and their tax treatment tracks the actual allocation rather than the category label. With the Finance Act 2023 eliminating the LTCG with indexation benefit for funds below the 65% equity threshold, and the Finance Act 2024 revising STCG and LTCG rates on equity-oriented funds, hybrid fund investors must pay particular attention to the equity allocation at the time of investment and at the time of redemption.

Taxation of international funds in India

Tue, 12 May 2026 00:00:00 +0000

Taxation of international mutual funds in India changed fundamentally with the Finance Act 2023, which classified most internationally-oriented funds as “specified mutual funds” for units acquired on or after 1 April 2023. Before that date, international funds investing in overseas equity enjoyed the same 20%-with-indexation LTCG treatment as domestic debt funds (after a 36-month holding period). From 1 April 2023, gains on new units of international funds are treated as short-term capital gains regardless of holding period and are taxed at the investor’s income-tax slab rate with no indexation benefit.

Taxation of SIPs (FIFO method)

Tue, 12 May 2026 00:00:00 +0000

Taxation of Systematic Investment Plans (SIPs) in India follows the same capital gains framework as lump-sum mutual fund investments, but with a critical difference in lot tracking: each SIP instalment creates a separate lot of units with its own acquisition date and purchase NAV. When units are redeemed, the tax computation must identify which lot is being redeemed and what the holding period of that lot is. The income-tax rules and mutual fund industry practice both apply the FIFO (First In, First Out) method, meaning the earliest-purchased units are treated as sold first. This creates a situation where a SIP investor who redeems a portion of their holdings may have a mix of long-term and short-term units in the same redemption transaction.

Taxation of STP transactions in mutual funds

Tue, 12 May 2026 00:00:00 +0000

Taxation of Systematic Transfer Plan (STP) transactions in mutual funds follows the same capital gains framework as any partial redemption. An STP is a facility that automatically transfers a fixed amount (or fixed units) from one mutual fund scheme (the “source” fund) to another scheme (the “target” fund) of the same AMC at regular intervals. Each STP transfer is treated as a partial redemption from the source fund and a simultaneous fresh purchase in the target fund. Capital gains crystallise on the source-fund units redeemed at the STP transfer date, and the target-fund units acquire a new holding period starting from the transfer date. There is no provision for deferred taxation or rollover relief for STP transactions under the Income Tax Act 1961.

Taxation of SWP withdrawals from mutual funds

Tue, 12 May 2026 00:00:00 +0000

Taxation of Systematic Withdrawal Plan (SWP) withdrawals from mutual funds follows the standard capital gains framework applied to partial redemptions. A SWP is a facility offered by mutual fund houses that allows investors to redeem a fixed amount (or fixed number of units) at regular intervals – typically monthly, quarterly, or annually. Each SWP instalment is treated as a partial redemption of units, and capital gains (or losses) crystallise on the redeemed units at the time of each withdrawal. The FIFO method is applied to identify which lot of units is being redeemed in each instalment, and the holding period of the identified lot determines whether the gain is short-term or long-term. SWP withdrawals are fundamentally different from IDCW (dividend) distributions in their tax treatment: unlike IDCW, which is taxed at slab rates as income from the fund, SWP withdrawals return a mix of capital (original investment) and capital gains, of which only the gains element is taxable.

TDS on MF redemption for NRIs (Section 195)

Tue, 12 May 2026 00:00:00 +0000

Tax Deducted at Source (TDS) on mutual fund redemptions for Non-Resident Indians (NRIs) is governed by Section 195 of the Income Tax Act 1961. Unlike resident investors who are not subject to TDS on capital gains from mutual fund redemptions, NRI investors are subject to TDS withheld by the fund house (AMC) at the time of redemption, before the net proceeds are credited to the investor’s NRE or NRO account. The TDS rate depends on the type of capital gain (short-term or long-term) and the fund classification (equity-oriented or non-equity), and is applied on gross redemption proceeds without deducting the Rs 1,25,000 annual LTCG exemption. Excess TDS can be reclaimed by the NRI by filing an income-tax return in India.

Console Tax P&L statement

Mon, 11 May 2026 00:00:00 +0000

Overview

The Console Tax P&L statement is a structured profit and loss report generated by Zerodha Console for a specified financial year. Unlike the raw Tradebook, which lists individual executions chronologically, the Tax P&L statement applies the First In, First Out (FIFO) cost-allocation method mandated by the Income Tax Act, 1961 to compute realised gains and losses at the scrip level. The output is segmented by holding period (short-term versus long-term for equity) and by income head (capital gains versus business income for F&O and intraday), making it directly usable in the appropriate schedule of the ITR.

Grandfathering rule for LTCG

Mon, 11 May 2026 00:00:00 +0000

The grandfathering rule for long-term capital gains (LTCG) is a transitional provision in Section 112A of the Income Tax Act 1961 that protects equity investors from being taxed on gains that accrued before 1 February 2018. Under the rule, the cost of acquisition for computing LTCG on listed equity shares and equity-oriented mutual funds acquired before 31 January 2018 is deemed to be the higher of the actual purchase price and the fair market value (FMV) of the asset as on 31 January 2018. This has the effect of “grandfathering” all pre-February 2018 appreciation out of the taxable base.

ITR-2 (Income Tax Return)

Mon, 11 May 2026 00:00:00 +0000

ITR-2 is the Income Tax Return form prescribed by the Central Board of Direct Taxes (CBDT) for use by individuals and Hindu Undivided Families (HUFs) who have income from sources other than profits and gains from business or profession. It is the form most commonly used by salaried employees and pensioners who also have capital gains from the sale of equity shares, equity mutual funds, property, or other assets, but who do not carry on any business activity.

ITR-ready capital gains statement

Mon, 11 May 2026 00:00:00 +0000

Overview

The ITR-ready capital gains statement is a formatted report generated by Zerodha through Zerodha Console that translates the raw trade history into the structured data required to complete Schedule CG (Capital Gains) and the business income schedules of Indian Income Tax Return forms. It is built on the same FIFO computation engine as the Tax P&L statement but is specifically designed to match the schedule-level input fields in ITR-2 (for salaried and capital gains taxpayers) and ITR-3 (for taxpayers with business or professional income, including F&O traders).