Debt Fund Tax Rules in India

For debt funds bought on or after 1 April 2023, all gains — regardless of how long you hold — are added to your income and taxed at your slab rate. The old 20%-with-indexation long-term benefit is gone.

• Applies to funds with under 35% equity (most debt and some conservative hybrids).
• Units bought before April 2023 may still get the old treatment.

Practical effect: debt funds are now taxed like an FD, but still offer better liquidity and no TDS on growth.

→ Screen debt funds in the MF screener.