Mutual Fund: You can achieve decent profits in the short run by investing in debt mutual funds. Nonetheless, one must be mindful of the tax regulations regarding mutual fund investments. The government has become more careful regarding this issue due to the significant rise in mutual fund investments seen recently.
Government strengthened the tax regulations
The Narendra Modi administration had also strengthened the tax regulations on earnings from mutual funds. However, Finance Minister Nirmala Sitharaman has the authority to modify the tax regulations regarding mutual fund loan schemes, potentially boosting investors’ interest in mutual fund debt options. Finance Minister Nirmala Sitharaman implemented a significant alteration in the capital gains tax regulations for debt schemes in Budget 2023, leading to a decline in investors’ interest in such schemes. Nonetheless, financial advisors suggest that if the government alters the tax regulations for loan schemes, the appeal of investing in debt funds might rise.
Anticipated assistance in the budget
Tax specialists indicate that the government encourages long-term investment. However, this does not appear to be true for debt funds. Investing a portion of one’s portfolio in debt can be advantageous, yet the existing tax regulations have diminished the appeal of debt fund investments. To promote long-term investment in these funds, the government may apply a 12.5% tax on long-term capital gains, a rate currently imposed on gains from other assets.
This will enhance the interest of individuals in the high income bracket to invest in debt funds. At present, the updated tax system levies a 30% tax on yearly income exceeding Rs 15 lakh, whereas the previous tax system taxed annual income over Rs 10 lakh at 30%, causing those earning more to hesitate in investing in debt funds.
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