Under India's new income tax regime, investments in debt mutual funds will be taxed as short-term capital gains, and local branches of multinational companies will face higher tax rates on royalty payouts. However, there will be some minor relief for individual taxpayers. It also raised the securities transaction tax rate by 25% on futures and options, according to the Finance Bill passed by the Lok Sabha on Friday with as many as 64 amendments.
According to experts, the removal of long-term capital gains tax advantages for debt mutual funds will negatively impact this popular investment option, as it will now be taxed similarly to bank deposits. The government's objective in implementing this change is to eliminate tax arbitrage between comparable financial instruments. According to Finance Secretary TV Somanathan, this step will establish parity with instruments that possess similar characteristics.
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