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Removal of LTCG tax benefits on debt MFs pushes corporate bond yields

Following govt's latest move, tax would be computed on based the investor's tax bracket; levy could be as high as 30%; Centre's step puts the tax for MF units at parity with that for bank FD

bond, debt fund
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Illustration by Ajay Mohanty

Bhaskar Dutta Mumbai
The yields on benchmark 3-year and 5-year corporate bonds jumped on Friday as the Lok Sabha’s nod for the removal of tax benefits for debt mutual fund investors soured market sentiment and led to concerns about incremental demand for corporate debt, traders said.

The House passed amendments to the Finance Bill 2023, according to which debt funds with not more than 35 per cent in equity shares will be taxed at the income tax slab rate, irrespective of the investment period. This removes the long-term capital gain tax benefits currently applicable for investors in debt mutual funds.

At present, if

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First Published: Mar 24 2023 | 4:20 PM IST

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