1. Provided that the mutual fund units are held as capital assets.
2. Non-resident individuals (NRI) shall be entitled to be governed by provisions of the applicable Tax Treaty, which India has entered with the country of residence of the NRI, if that is more beneficial than the provisions of the Act , subject to certain conditions. As per section 90(4) of the Act, a non-resident shall not be entitled to claim treaty benefits, unless the non-resident obtains a Tax Residency Certificate of being a resident of home country. Furthermore, as per section 90(5) of the Act, non-resident is also required to provide such other documents and information, as prescribed by CBDT, as applicable.
3. Relaxation to NRIs from deduction of tax at higher rate (except income distributed by mutual fund) in the absence of Permanent Account Number (PAN) is subject to the NRI providing specified information and documents. As per provisions of Section 206AA of the Act, if there is default on the part of a NRI (entitled to receive redemption proceeds from the Mutual Fund on which tax is deductible under Chapter XVII of the Act) to provide its PAN, the tax shall be deducted at higher of the following rates: i) rates specified in relevant provisions of the Act; or ii) rate or rates in force; or iii) rate of 20%. However, the provisions of section 206AA of the Act shall not apply, if the requirements as stated in Rule 37BC of the Income-tax Rules, 1962, are met.
4. Section 206AB of the Act provides for higher rate for TDS for the non-filers of income-tax return. The TDS rate in this section is higher of the following rates: i) twice the rate specified in the relevant provision of the Act; or ii) twice the rate or rates in force; or iii) the rate of five per cent. However, the said provision does not apply to a non-resident who does not have a permanent establishment in India and a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf..
5. Surcharge Rate as a percentage of Income-tax

   Tax Status	Income < ₹50 lakh	Income > ₹50 lakh but < /= ₹1 crore	Income > ₹1 crore but < /= ₹2 crore	Income > ₹2 crore but < /= ₹5 crore	Income > ₹5 crore
   Individual / HUF/ AOP (resident & foreign)*	NIL	10%	15%	15%	37%

   In addition, "Health and Education Cess" @ 4% shall be applicable on aggregate of base tax and surcharge.
   • The surcharge rate applicable to capital gains taxable under section 112, 112A and 111A of the Act is capped to 15%.
   • In case investor is opting for 'New Tax Regime' under section 115BAC (1A) of the Act , the rate of surcharge is capped at 25%.
6. Capital gains arising on transfer or redemption of Units of schemes other than EOF and other than specified mutual fund as per section 50AA of the Act shall be regarded as long-term capital gains, if such units are held for a period of more than 36 months immediately preceding the date of such transfer.
7. Securities Transaction Tax (STT) in respect of Units equity-oriented mutual fund Schemes

   Transaction	Rates	Payable by
   Purchase of units of equity-oriented mutual fund	Nil	Not Appliable
   Sale of units of equity-oriented mutual fund (delivery based)	0.001%	Seller
   Sale of units of equity-oriented mutual fund (non-delivery based)	0.025%	Seller
   Sale of units of an equity-oriented fund to the Mutual Fund	0.001%	Seller

   Which are the Categories of MF Schemes which fall under "Other than Equity Oriented Funds"?
   • Liquid Funds /Money Market Funds / Income Funds (Debt Funds) / Gilt Funds
   • Gold ETFs / Bond ETF / Liquid ETF
   • Fund Of Funds (Domestic) other than Fund of funds as defined under the "Equity Oriented Fund" definition under section 112A of the Act
   • Hybrid Fund (Equity exposure < 65%)
   • Fund Of Funds Investing Overseas
   • Infrastructure Debt Funds
   • Specified mutual funds as defined under section 50AA of the Act

1. Capital gains arising on Transfer of units upon consolidation of mutual fund schemes of two or more schemes of EOFs or two or more schemes of a Scheme other than EOF in accordance with SEBI (Mutual Funds) Regulations, 1996 is exempt from capital gains tax.
2. Likewise, Capital gains arising on Transfer of units upon consolidation of Plans within a mutual fund scheme in accordance with SEBI (Mutual Funds) Regulations, 1996 is exempt from capital gains tax.
3. Currently, switching units of mutual fund within the same scheme from Growth Plan to Dividend Plan and vice-versa is subject to capital gains tax.
4. Creation of segregated portfolio: SEBI has permitted creation of segregated portfolio of debt and money market instruments by mutual fund schemes in certain situations. As per the said SEBI circular, all existing unit holders in the affected mutual fund scheme as on the date of the credit event shall be allotted equal number of units in the segregated portfolio as held in the main portfolio. As per sub-sections (2AG) and (2AH) to Section 49 of the Act, cost of acquisition of a unit or units in a segregated portfolio shall be the amount which bears to the cost of acquisition of a unit or units held by the assessee in the total portfolio in the same proportion as the net asset value of the asset transferred to the segregated portfolio bears to the net asset value of the total portfolio immediately before the segregation of portfolios. Further, the cost of acquisition of the original units held by the unit holder in the main portfolio shall be reduced by the amount as so arrived for the units of segregated portfolio.

An Equity Oriented Mutual Fund has been defined in section 112A of the Act. As per the said definition, a fund of fund scheme structure shall be treated as an Equity Oriented Fund if:

• A minimum of ninety per cent of the total proceeds of such fund is invested in the units of such other fund; and
• such other fund also invests a minimum of ninety per cent of its total proceeds in the equity shares of domestic companies listed on a recognised stock exchange.

Thus, if a fund invests in units of other funds and fulfills the aforementioned criteria, then it shall be regarded as Equity Oriented Fund. However, if the aforementioned conditions are not fulfilled, then the same shall be regarded as other than Equity Oriented Fund and subjected to the same tax treatment as applicable to a non-equity-oriented fund. However, section 50AA of the Act deems any gains on transfer / redemption of units of specified mutual funds acquired on or after 1 April 2023 as short-term capital gains. For the purposes of section 50AA, "specified mutual fund" means a mutual fund by whatever name called, where not more than 35% of its total proceeds is invested in the equity shares of domestic companies. Accordingly, an "equity-oriented fund" which invests in units of another fund instead of investing directly in equity shares of domestic company may be regarded as "specified mutual fund" as per section 50AA of the Act and taxed accordingly.

As per Section 94(8), the loss due to sale of original units in the schemes, where bonus units are issued, will not be available for set off; if original units are: (A) bought within three months prior to the record date fixed for allotment of bonus units; and (B) sold within nine months after the record date fixed for allotment of bonus units. However, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units held on the date of transfer of original units. The provision of this sub section are also applicable to securities. Further, the definitions of the terms "unit" and "record date" also include the units of business trusts (i.e. Real Estate Investment Trusts [REITs]/ Infrastructure Investment Trusts [InvITs]) and units of Alternate Investment Funds in the ambit of the said section.