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Debt funds will be taxed more, Market Overview, Our best reads & More


🔆 Saturday Coffee Newsletter

  • Market Overview: Top stocks & asset classes
  • Taxation: Your debt funds will be taxed more
  • Good Reads: 5 good reads on investing & finance
  • Pop Quiz: Answer and win a cool prize!

What’s up with markets? 📉📈

Nifty 50 gained 2.5% this week but still closed negative on monthly basis. There’s a lot happening in the markets and yet, when you zoom out, things haven’t moved in the last 1 year. Last 1 year has been of Gold dominance in India as it is up 15% Y-o-Y.

Debt funds will be taxed more, Market Overview, Our best reads & More

This week’s rally was led by Banks & Financial services stocks. Reliance, which is an index in itself, also pulled the index up. Among the losers, we highlight that Media and Auto Index has been the worst performer in the last 5 years. Especially for the Auto sector, it will be interesting to see when the tide will turn.

Debt funds will be taxed more, Market Overview, Our best reads & More

Debt funds won’t be as tax efficient 👀

The finance ministry has just delivered an inswinging yorker to the debt mutual fund industry, which has survived too long with a high backlift. (In less complex language: A surprise that could throw you out of the game)

If you don’t understand cricket, this will sound meaningless, which is exactly what that change sounds like if you don’t invest in debt mutual funds. But for those that do, here’s what’s come about.

Any purchases after 1 April 2023, when sold, will see only short-term capital gains tax. For such funds, it means the gain is just added to your income.

There is no long term capital gains tax on such funds anymore, and this applies to:

  • Debt funds – from liquid to ultra-short-term to long-term or gilt funds
  • Funds that invest abroad, because anything abroad is not Indian-listed equity shares
  • Gold or Silver funds
  • Target maturity debt funds which were popular recently to buy funds of a certain maturity date
  • Fund of Funds even if they invest in equity funds (such as a mutual fund that invests in a combination of equity funds)
  • Conservative hybrid funds which typically have less than 35% of equity funds

Note that this only applies to fresh investments (additional or new). Your current investments continue to benefit from the lower capital gains tax and indexation benefits, no matter when you sell them.

Deepak Shenoy, explains the whole thing in the simplest of language. Check out the full post as he covers:

  • Size of the debt fund investments in India
  • How bad is the tax difference?
  • Does it make no sense to use debt funds at all?
  • What are we doing at the Capitalmind Wealth PMS?

Read the full post: Debt Mutual Funds will be taxed unfavorably after April 2023

What we are reading 📝

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