- Debt fund investments post-April 1, 2023 taxed at slab rates.
- Older debt fund gains taxed at 12.5% if held over two years.
- Equity long-term gains up to ₹1.25 lakh are tax-free.
ITR 2026:Understanding how different investments are taxed can get confusing, especially when rules change across categories. For FY 2025-26, income from debt mutual funds, equity investments, and fixed deposits is treated differently under tax laws. These differences can directly impact your final tax outgo.
Here is a simple breakdown of how each income stream is taxed and how the total liability is calculated. This should help you get a clearer picture of what to expect while filing your ITR this year.
How Are Debt Funds And Equity Gains Taxed In FY 2026?
Debt mutual funds are divided into two categories based on when the investment was made. Investments made after April 1, 2023, are always treated as short-term capital gains, regardless of holding period. These gains are added to your income and taxed as per your slab rate.
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Older investments follow different rules. For example, gains of Rs 3.20 lakh from the ABSL Corporate Bond Fund, purchased before April 1, 2023 and held for over two years, are treated as long-term capital gains. These are taxed at a flat rate of 12.50%, resulting in a tax of Rs 40,000.
Equity gains are treated separately. Long-term gains up to Rs 1.25 lakh are tax-free, so Rs 1.20 lakh attracts no tax. Short-term gains of Rs 30,000 are taxed at 20%, leading to a tax of Rs 600.
How Is Salary And Interest Income Taxed And What Is The Total Liability?
From a salary of Rs 20 lakh, a standard deduction of Rs 75,000 reduces the taxable salary to Rs 19.25 lakh under the old tax regime.
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Adding Rs 4 lakh as interest income takes the total taxable income to Rs 23.25 lakh, which is taxed as per slab rates. The tax on this portion comes to Rs 78,750.
Adding all components, the total tax liability stands at Rs 1,24,750. A 4% cess of Rs 4,990 is applied, taking the final payable tax to Rs 1,29,740.
