---
title: What’s the tax on mutual fund withdrawals?
description: "Tax on mutual fund withdrawals in India depends on the type of fund and the holding period When you withdraw (redeem) units from a mutual fund, the **tax you pay depends** on: - the type of fund (equity-oriented vs non-equity)…"
url: "https://arafinserv.com/fa/withdrawals-loans-returns/whats-the-tax-on-mutual-fund-withdrawals/"
updated: "2025-11-20"
category: "Withdrawals, Loans & Returns"
---

# What’s the tax on mutual fund withdrawals?

Tax on mutual fund withdrawals in India depends on the type of fund and the holding period

When you withdraw (redeem) units from a mutual fund, the **tax you pay depends** on:

- the type of fund (equity-oriented vs non-equity)
- how long you held the units
- the date of investment (because rules changed)

**For Equity-Oriented Mutual Funds (65%+ in equity shares)**

- If you redeem within **12 months** of investment → it’s treated as **Short-Term Capital Gains (STCG)** and taxed at **20% + cess & surcharge**.
- If you redeem after **12 months** → it’s treated as **Long-Term Capital Gains (LTCG)**. Gains up to **₹****1,25,000 in a financial year** are **exempt**; gains above that are taxed at **12.5% + cess & surcharge**.

**For Non-Equity or Debt-Oriented Funds**

When you withdraw (redeem) units from a debt-oriented mutual fund (i.e., a scheme that invests primarily in debt or money-market instruments), taxation depends on **when you invested** and the **holding period**. Recently, the tax rules have changed, so accurate record-keeping is critical.

**Key Rules for Debt Funds**

- For units purchased **on or after 1 April 2023**: All gains (irrespective of how long you hold the investment) are treated as **Short-Term Capital Gains (STCG)** and taxed at your **applicable income tax slab rate**. Indexation benefit and the prior long-term capital gains (LTCG) special rates do **not** apply.
- For units purchased **on or before 31 March 2023**:
  - If you sell/ redeem **within 24 months**: gains will be taxed at your income-tax slab rate (STCG)
  - If you hold for longer than the threshold (**more than 24 months**), then the gains are treated as **LTCG** and taxed at a **flat 12.5%** (plus cess/surcharge) without indexation benefit.

Since tax rules are dynamic and subject to change, we recommend consulting your tax advisor for the latest and detailed guidance.