How did last 6 budgets of Modi govt impact mutual funds?

Introduction of LTCG tax and DDT in 2018-19
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Introduction of LTCG tax and DDT in 2018-19

The finance minister introduced a 10% tax on long term capital gains made in equity schemes over Rs 1 lakh in a financial year, without providing any indexation benefit. The finance minister added that all the gains up to 31st January 2018 will be grandfathered. The minister also announced 10% dividend distribution tax (DDT) on equity schemes.

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Tax exemption on unit transfer on merger of schemes
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Tax exemption on unit transfer on merger of schemes

When two mutual fund schemes sued to get merged, an investor had to pay tax on the old scheme as the merger was considered a redemption. The 2016-17 budget stopped this unjust practise. The finance minister exempted any transfer of units in merger or consolidation of plans of a mutual fund scheme from capital gains tax.

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Hike in surcharge on dividend distribution tax
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Hike in surcharge on dividend distribution tax

In Budget 2015-16, the finance minister proposed a higher surcharge @12% as against the rate of 10% on income distributed by mutual funds as dividends. The move did not impact equity funds as the dividends paid out of equity funds were not taxed.In case of debt-oriented mutual funds, DDT increased from 28.33% to 28.84% (25% +12% surcharge +3% cess).The finance minister also increased the service tax plus education cess from 12.36 per cent to a consolidated rate of 14%.This budget also withdrew the exemption to pay service tax from distributors.

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Changes in debt mutual fund space
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Changes in debt mutual fund space

In 2014-15, the finance minister increased the holding period for non-equity schemes to qualify for long-term capital gains from 12 months to 36 months.Also, the long-term capital gains tax was hiked from 10% without indexation or 20% after indexation to 20% after providing for indexation benefit.The FM proposed to calculate dividend distribution tax on gross income (including distribution tax). Earlier, DDT was calculated on income distributed net of distribution taxes.

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