Budget 2018: Impact on your Mutual funds, Stocks & Taxes.

Budget 2018

Budget 2018: Impact on your Mutual funds, Stocks & Taxes.

Introduction of tax on long term capital gains on equity:

  • Capital gains of Rs 1 lakh and above on sale of equity shares & equity oriented mutual fund will be taxed @ 10% without giving the benefit of indexation.
  • LTCG on Equities will be applicable on holdings of more than 1 year.
  • Capital gains tax until 31 January 2018 will be grandfathered.
  • For instance, if you have invested in an equity fund with NAV of Rs.10 on August 9, 2017 and the price of NAV has grown to Rs.15 on January 31, 2018. Today, if you redeem after your investment completes one year, say on 10th Aug 2018 and the NAV on that day is Rs.18, then you will have to pay tax on Rs.3 (18-15) instead of Rs.8 (18-10) as the date of acquisition has changed from the actual date (August 9, 2017) to the grandfathered date (January 31, 2018). The tax will have to be paid only on the Gains exceeding Rs. 1 lakh.
  • LTCG would not impact smaller investors and they do not have anything to worry about.

Equity Oriented Mutual funds to face a Dividend Distribution Tax @ 10%:

  • Till now, Equity oriented mutual fund scheme was out from Dividend Distribution Tax. Debt mutual funds pay dividend distribution tax of 28.84 per cent (25 per cent tax + 12 per cent surcharge + 3 per cent cess).
  • However, from now, mutual fund houses will have to pay a Dividend Distribution Tax of 10 per cent on dividends declared under equity schemes.
  • DDT is paid by the mutual fund houses and not by investors. However, investors would be impacted as the company pays the tax out of the declared profits and it will reduce the dividends to that extent.
  • If you don’t have the need for regular income from mutual fund then growth plan is a better option over a dividend plan.

Reduction in corporate tax rate to 25% for companies having a turnover of Rs 250 crores and less.

  • For domestic companies having total turnover or gross receipts not exceeding Rs.250 crores in a financial year 2016-17 shall be liable to pay tax at 25%. Earlier this limit of total turnover was Rs.50 crore in Financial year 2015-16. This would have positive impact on stocks or mutual fund scheme consisting of the stocks having turnover of Rs.250 crores and less.

Income Tax

  • Personal income tax slab rates remain unchanged.

Budget 2018


  • 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • 15% of income tax, where the total income exceeds Rs.1 crore.

*Income tax exemption limit for FY 2018-19 is up to Rs. 2,50,000 for individual & HUF


  • Cess: 4% on total of income tax (Education cess now to be called as Health and Education cess effective rate increased to 4% from 3%)

Introduction of Standard deduction of Rs 40,000 for the salaried class (replacing the transport allowance and the miscellaneous medical Reimbursement):

  • The benefit of transport allowance of Rs.19,200 and Medical Reimbursement of Rs.15,000 under section 17(2) are being withdrawn. Thus net benefit after budget announcement is only Rs.5,800.

Senior Citizens

Removal of TDS on interest from FD up to Rs 50,000 for Senior Citizens

  • Till now, TDS on interest on fixed deposits was 10% of the amount paid or expected to be paid during the financial year exceeds Rs. 10,000. Interest on Fixed deposits are free from TDS up to Rs.50,000 for senior citizens.

Exemption under Section 80D up to Rs 50,000 for medical insurance for senior citizens:

  • The premium paid towards health insurance policies qualifies for deduction under Section 80D of the Income Tax Act. The benefit is available to individuals for health insurance premiums paid for self, spouse, children, and parents. The exemption has been increased from Rs.30,000 to Rs.50,000. 

Exemption limit for medical expenditure increased:

  • Exemption limit for medical expenditure for certain critical illness from raised from Rs 60,000/- in case of senior citizens and from Rs 80,000 in case of very senior citizens, to Rs 1 lakh in respect of all senior citizens, under section 80DDB.

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2 Comments on “Budget 2018: Impact on your Mutual funds, Stocks & Taxes.”

  1. Does this change will impact new funds selection to invest in 2018, if yes then how ?
    I am planning to start some SIP so please guide.

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