India Union Budget 2025-2026 Mutual Fund Industry demands restoration of indexation benefits for debt funds.

The Finance Act 2023 stipulated that debt funds should be deemed as Short Term Capital Gains (S.T.C.G) irrespective of period of holding.Thus the benefit of Long Term taxation benefits for debt schemes was withdrawn last year. Therefore it was subject to taxation at applicable rate of S.T.C.G.

Ahead of the Union Budget 2025-2026 the Mutual Fund Industry demands the review the withdrawal of indexation on long term debt investments. Further they demand taxing capital gains on redemption of debt mutual fund portfolio held for more than 1 year at the rate of 12.5%. Before Union Budget 2023 investment in debt mutual fund held for a period of 1 year or more was allowed indexation benefits to mitigate impact of inflation on capital gains. If indexation benefits is allowed by the upcoming budget on February 01,2025 it would more beneficial and favourable to retail investors.