Specified Mutual Fund on WebNotes

Parag Parikh Liquid Fund Tax Treatment

Sat, 16 May 2026 00:00:00 +0000

The Parag Parikh Liquid Fund is the PPFAS Mutual Fund liquid scheme, launched on 9 May 2018 and benchmarked to the CRISIL Liquid Debt B-I Index. As a debt-oriented mutual fund under the SEBI Mutual Funds Regulations 1996 liquid-fund category, the scheme is taxed under the debt-oriented mutual fund framework, which was materially restructured by the Finance Act 2023 through the insertion of Section 50AA into the Income-tax Act, 1961 , effective 1 April 2023.

Indexation removal for debt MFs (Finance Act 2023)

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

Indexation removal for debt mutual funds refers to the legislative change effected by the Finance Act 2023 that eliminated the benefit of indexation – the inflation-adjustment of the cost of acquisition using the Cost Inflation Index (CII) – for units of “specified mutual funds” acquired on or after 1 April 2023. Simultaneously, the Finance Act 2023 abolished the concept of long-term capital assets for such funds, treating all gains (irrespective of holding period) as short-term capital gains taxed at the investor’s slab rate. The change fundamentally altered the competitive tax advantage that long-term debt mutual fund investment had over bank fixed deposits for investors in the higher income-tax brackets.

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 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.