How new taxation rules impact your fund investments

The recent budget has enhanced the new tax regime and introduced new tax rules. While you can read the highlights here, let's dive to see how these changes impact the different fund categories.

Impact on investors

• Higher taxes on equity gains will reduce your post-tax returns, but equity remains the best asset class for long-term investments, so stick to your plan.
  
• International and gold funds benefit from a tax reduction to 12.5 per cent starting April 1, 2025. While the reduced tax for international funds is welcome, we had hoped for enhanced overseas investment limits.
  
• Hybrid funds continue to shine with their tax-free auto-rebalancing feature. Our preferred categories are aggressive hybrid and equity savings funds due to their stable asset allocation.
  
• The new tax regime discourages savings by reducing the emphasis on Section 80C, which is disappointing as tax-saving investments often encourage broader saving habits.
  
• Lastly, the removal of the indexation benefit from all asset classes is a setback, as inflation erodes long-term investments.

Also read: You can get our CEO - Mr Dhirendra Kumar's views on these developments here and here.