Capital gains on mutual funds, after Budget 2024
What changed on 23 July 2024, how FIFO decides which units you sold, and why one financial year can use two different rates.
What changed on 23 July 2024
Budget 2024 reset the rates for equity mutual funds mid-year. The date that matters is the date you sold, not the date you bought — so units held for years can fall under either rule set depending on when you redeemed them.
Through 22 Jul 2024
- Short-term
- 15%
- Long-term
- 10%
- Annual exemption
- ₹1.00 L
Budget 2024 onward
- Short-term
- 20%
- Long-term
- 12.5%
- Annual exemption
- ₹1.25 L
FIFO decides which units you sold
You never choose which units leave. Indian capital-gains statements use first-in-first-out: the oldest units you still hold go first. That is why a single redemption can produce several tax rows, and why selling “the ones I bought last month” is not something you can actually do.
Take one purchase of 10,000 units on 12 April 2022 for ₹10,00,000, then two redemptions in the same financial year — one on either side of the rate change.
| Sold | Units | Cost | Proceeds | Gain | Rules applied |
|---|---|---|---|---|---|
| 10 July 2024 | 4,000 | ₹4.00 L | ₹6.00 L | ₹2.00 L | Through 22 Jul 2024 |
| 20 February 2025 | 4,000 | ₹4.00 L | ₹7.20 L | ₹3.20 L | Budget 2024 onward |
Both sales are long-term — the units were held well over 12 months — and both draw their cost from the same 2022 lot, so the cost per unit is identical. Only the rule set differs.
One year, two exemptions
This is the part that catches people out. Because FY 2024-25 straddles the change, each sale is bucketed by the rules in force on its own date, and each bucket gets its own exemption. The two exemptions are ₹1.00 L and ₹1.25 L — together ₹2.25 L here.
Long-term gains
₹5.20 L
before exemption
Exemption used
₹2.25 L
across both buckets
Taxable
₹2.95 L
after exemption
Applying each sub-bucket's exemption separately is a conservative reading of a genuinely ambiguous situation — the CBDT has not published guidance on how two exemption regimes blend inside one financial year. Treat the figure as a careful estimate, not a filing position.
What this worked example leaves out
Being explicit, because a tax number that quietly omits things is worse than no number: there is no indexation for pre-2023 debt funds, no grandfathering for equity bought before 31 January 2018, no set-off of losses carried forward from earlier years, and STT and exit load are not broken out separately. Debt funds bought on or after 1 April 2023 are always short-term regardless of how long you hold them.