Decoding Finance Bill proposals for debt funds: What remains and what changes

The Finance Bill 2023 has announced an amendment that will classify capital gains arising from debt mutual funds as only short-term capital gains. The government has said that investment in mutual fund where not more than 35 percent is invested in equity shares of Indian company (which is debt funds) will now be deemed to be short-term capital gains. This means long-term capital gains will go away.

Also, debt funds held for more than three years will no longer enjoy indexation benefits. Additionally, they won't be eligible for a 20 percent tax rate.

This will be applicable to investments made on or after April 1, 2023.