Taxation: Mutual Funds Vs. Fixed Deposits (2025)

📢Understanding the taxation of Fixed Deposits (FDs) and Mutual Funds is crucial for smart financial planning. Based on the latest income tax rules from the February 2025 Union Budget, here’s a simplified overview of how these investments are taxed.

🔹 Fixed Deposits (FDs) Taxation 🏦

✅ Taxable Interest – Interest earned from FDs is fully taxable and must be reported under ‘Income from Other Sources’.

📌 Tax Deducted at Source (TDS) on FD Interest

💡 Thresholds:

• For non-senior citizens – TDS applies if interest exceeds ₹50,000 per annum.
• For senior citizens – TDS applies if interest exceeds ₹1 lakh per annum.

💡 TDS Rates:

• 10% deduction if PAN is provided.
• 20% deduction if PAN is NOT provided.

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🔹 Mutual Funds Taxation (Equity & Debt Funds) 📈

📌 Equity-Oriented Mutual Funds (holding more than 65% in equities)

✅ Short-Term Capital Gains (STCG):

• Holding Period: Less than 12 months.
• Tax Rate: 20% flat tax on short-term gains.

✅ Long-Term Capital Gains (LTCG):

• Holding Period: More than 12 months.
• Tax Rate: Gains up to ₹1.25 lakh per annum are exempt; excess gains taxed at 12.5%.

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📌 Debt-Oriented Mutual Funds (holding more than 65% in debt instruments)

✅ Short-Term Capital Gains (STCG):

• Holding Period: Less than 24 months.
• Tax Rate: Taxed as per your income tax slab.

✅ Long-Term Capital Gains (LTCG):

• Holding Period: More than 24 months.
• Tax Rate: 12.5% flat tax without indexation benefit.

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⚠️ Important Notes on Mutual Fund & Fixed Deposit Taxation

• Mutual Fund profit is taxable only when redeemed
• Fixed Deposit interest is taxed every year irrespective whether it is closed or continued
• Mutual Fund Dividends are taxable as per your income tax slab.
• Tax laws are subject to change – Always consult a tax professional or refer to latest government notifications for accurate investment tax planning.

💡 Final Takeaway:
FDs offer safety but higher tax liability, while Mutual Funds provide tax-efficient wealth growth. Choose wisely based on your financial goals & risk appetite! 🚀💰

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Act wise to Maximize Returns & Minimize Taxes in 2025!" 💰📊