Income Tax, Nov. 22 -- Just like any financial asset, the sale of mutual funds also attracts capital gains tax. How much capital gains tax is levied hinges on two key factors: whether it is equity or debt mutual fund, and how long is the holding period (i.e., whether it is short term or long term gain).

Different rules apply on it. Here we deconstruct the capital gain rules based on the category of mutual funds. The rate of capital gains tax is high (20%) when the tenor is short and the rate is low (12.5%) in case of long tenor.

Equity mutual funds refer to those funds which have 65 percent or higher allocation of assets to equity. If you sell the units of equity mutual funds within one year of purchase, gains accured on the sale are ta...