Union Budget 2024: Much needed clarity on taxation of FOFs and gold/silver ETFs

In the Union Budget 2024, the Union Finance Minister Nirmala Sitharaman has provided much needed clarity on taxation of FOFs and gold/silver ETFs.

The government clarifies that fund of funds, multi asset allocation fund with less than 65% exposure to equities, international funds and gold/silver ETFs will be taxed at 20% for short term gains if holding period of less than 24 months. The long-term capital gains will be taxed at 12.50% if units are held for more than 24 months.

Further, there will be no change in debt fund taxation. It will continue to be taxed at marginal rate of taxation irrespective of holding period.

In the budget speech, Sitharaman said, “Unlisted bonds and debentures, debt mutual funds and market linked debentures, irrespective of holding period, however, will attract tax on capital gains at applicable rates.”

Also, the finance bill says, “It is thus proposed to amend the definition of “Specified Mutual Fund” under clause (ii) of Explanation of section 50AA to provide that a specified mutual fund shall mean a mutual fund: (a) a Mutual Fund by whatever name called, which invests more than sixty five per cent of its total proceeds in debt and money market instruments; or (b) a fund which invests sixty five per cent or more of its total proceeds in units of a fund referred to in sub-clause (a).”

Here are the details of the new tax structure:

Source: Cafemutual

Please note that we have interpreted these norms based on our research. We request you to not to consider as tax advice and wait for some more time for further clarification.