Taxation on international equity-based: (a) ETF, (b) Its MF, and (c) Its FOF MF


Given the article by ET: Debt mutual funds: No LTCG tax benefit from April 1, 2023; what it means for investors.

I would like to understand whether there is any difference in terms of taxation on international equity-based: (a) ETF, (b) Its MF, and (c) Its FOF MF? For e.g.: Whether the ETF “MON100,” the MF “ICICI Prudential NASDAQ 100 Index Fund Direct-Growth” and the FOF MF viz. “Motilal Oswal Nasdaq 100 Fund of Fund” will have different tax implications if someone has invested from April 1, 2023, onwards. If yes then which one will come under which MF/ETF category and what would be the tax rate for each of the three (given investments made from April 1, 2023, onwards)?


Hey @AG_125,

As per the amendment stated by you, if any ETFs, MFs and FOF MFs are acquired after April 1, 2023, which have less than 35% of total assets invested in domestic companies in India will be considered as Debt Funds and it will be taxed at slab rates without any indexation benefit.

You need to check the funds if they have less than 35% of total assets invested in domestic companies.

Hope this helps!

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Thanks, @CA_Niyati_Mistry! Just one clarification: -

  1. If at the time of purchase (after April 1, 2023) someone is at a 5% tax slab rate but while selling say after 2 years if he is in a 30% tax slab rate then he needs to pay ~30% tax on profits?
  2. Also, he may have some liberty i.e. if while buying (after April 1, 2023) he is at a 30% tax slab rate but while selling after 1-3 years he is under say 5% tax slab, then needs to pay taxes at ~5% on profits?
  3. However, if profits are higher say 20L, and even if no other income then ultimately he will come under the 30% tax slab rate and need to pay taxes accordingly, am I right?

Hey @AG_125,

Yes, all the three situations stated by you are correct. The tax on profits will be levied at the tax slab rate in which you fall at the time you sell the ETFs, MFs. So as per your stated case in first case the profits will be taxed at 30%, in second at 5% and in third it will be taxed at 30%.

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Thank you, @CA_Niyati_Mistry for the explanation!

hi @CA_Niyati_Mistry

but grow mentioned something different from what you said .(this is a recent article )
can you share any official document that supports your comment ?


For Gold, Debt and Other ETFs

The tax structure is similar for gold, debt, and other ETFs. But, the long-term and short-term capital gains are defined in this case.

Capital gains are considered short-term capital gains if the income arises from the sale of stocks that were on hold for less than 3 years. Likewise, capital gains are considered long-term capital gains when the holding period is greater than 3 years.

  • For long-term capital gains from gold, debt, or international ETFs, the tax structure is at 20%, along with indexation benefits.

  • For short-term capital gains, the amount will be added to the investor’s annual income and taxed as per the applicable income tax slab rates.

Hello @Kirubagaran,

The Gold and other ETFs get taxed as mentioned in the article i.e. 20% in case of long term and slab rate in case of short term.

However, in case of debt ETFs and mutual funds the taxation has been amended in the budget for any funds acquired on or after April 1, 2023. The tax will now be levied at slab rate without any indexation benefit irrespective of the holding period.

Hi @CA_Niyati_Mistry
consider a scenario

kumar bought MON100 ETF (International Equity ETF) for RS 100 on 2024
after 5 years he sold it for Rs 200 (ie 2029)

he made Rs 100 profit right ?

i want to know how much tax kumar needs to pay

he needs to pay 20% on the profit (with indexation it will be less than 20)
he needs to pay tax based on the slab rate (ie 30 % + 4% cess)

kirubagaran :slight_smile:

Hello @Kirubagaran,

As per the budget amendment, any fund which has less than 35% investment in domestic Indian companies equity will be considered a debt fund.

In the case stated by you, Mr. Kumar will have to pay tax based on slab rate without any indexation benefit.

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