I’ve taken a two-year break from work to travel and explore personal interests. Last year, I redeemed mutual funds worth ₹5.1 lakh, generating approximately ₹2 lakh in long-term capital gains. Will I have any tax liability this year, and how will it be calculated?
If the gains are from non-equity funds (like debt or liquid funds), they will be taxed according to your income tax slab. For example, if you’re in the 5% tax bracket, your tax would be ₹10,000 (₹2 lakh x 5%). If your slab rate is 20%, the tax would be ₹40,000, and for 30%, it would be ₹60,000.
However, if these gains are from equity mutual funds, the first ₹1 lakh of long-term capital gains is exempt. This would make only ₹1 lakh taxable at 10%, resulting in a tax of ₹10,000. If you have no other income, you may not have to pay tax if your gains can be adjusted against the basic exemption limit of ₹2.5 lakh.
It’s advisable to file your taxes even if no tax is due. Keep in mind, the recent budget has updated the rules, increasing the exemption on long-term capital gains from ₹1 lakh to ₹1.25 lakh.
