Wed Jan 29 03:17:44 IST 2025: ## AMFI Urges Tax Reform for Debt Mutual Funds Ahead of Budget 2025

**New Delhi, January 28, 2025** – With the Union Budget 2025 scheduled for February 1st, the Association of Mutual Funds in India (AMFI) has proposed a significant overhaul to the taxation of debt mutual funds. Currently, all gains from debt mutual funds held for less than a year are taxed as short-term capital gains, resulting in a higher tax burden. AMFI suggests aligning the tax treatment of debt mutual funds with that of listed bonds, proposing a 12.5% tax on gains from funds held for over 12 months.

This proposal comes amidst ongoing discussions regarding capital gains tax structure updates in the upcoming budget. The current system levies a 20% tax on short-term gains from listed equity shares and equity-based mutual funds (previously 15%), while short-term gains from assets like real estate and bonds are taxed according to individual income tax slabs. Long-term capital gains (LTCG) from equity shares, equity mutual funds, and business trust units exceeding ₹1.25 lakh annually are taxed at 12.5% (increased from ₹1 lakh in Budget 2024). For assets like real estate and bonds held for over 24 months, LTCG is taxed at 12.5% without indexation benefits, or 20% with indexation benefits for properties acquired before July 23, 2024. AMFI’s suggestion aims to simplify and rationalize the taxation of debt mutual funds, potentially making them more attractive to investors.

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