What are the Tax-Implications in ETFs?

For Equity ETFs:

  • The tax on redemption of equity ETFs is calculated based on the holding period.
  • Long-term capital gain occurs when the holding period exceeds a year.
  • If the gain is less than Rs.1 lakh, it is exempt.
  • Long-term capital gains of more than Rs.1 lakh are taxed at 10% without indexation benefits.
  • However, if the holding period is less than 12 months, the short-term capital gain is subject to a 15% tax liability.

For Debt, Commodity & International ETFs:

For long term capital gains, the tax structure is at 20% along with indexation benefits. For short-term capital gains, the amount will be added to the investor's annual income and taxed as per the applicable income tax slab rates.