Is ETF taxable in India? (2024)

Is ETF taxable in India?

For long-term capital gains from gold, debt, or international ETFs, 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.

How are ETF taxed in India?

The long-term capital gains tax is 10%, plus applicable surcharges and cesses. Short-term capital gains tax is 15%, plus surcharges and cesses. Other types of ETFs, such as gold, debt, and international ETFs, are taxed according to the income tax slab, irrespective of the holding period.

Do I need to pay taxes on ETFs?

If you sell an equity or bond ETF, any gains will be taxed based on how long you owned it and your income. For ETFs held more than a year, you'll owe long-term capital gains taxes at a rate up to 23.8%, once you include the 3.8% Net Investment Income Tax (NIIT) on high earners.

Does ETF come under 80C?

Yes, certain tax-saving ETFs, such as Equity-Linked Savings Schemes (ELSS) ETFs, offer deductions under Section 80C of the Income Tax Act. Are ETF dividends taxable in India?

Is investing in ETF a good idea in India?

It is crucial to take these into account before making any investment decisions: Reduced potential for returns: Due to their passive tracking of an index, ETFs may not exhibit significant outperformance of the market over the long term when compared to actively managed funds.

How do I avoid taxes on my ETF?

ETFs can bypass taxable events using the in-kind redemption process, while also purging their portfolios of low-cost-basis securities to help portfolio managers avoid realizing large gains if they must sell holdings. But not all ETFs create and redeem shares in kind.

Do ETFs pay dividends in India?

Dividends are shares of the profits received by the shareholders (equity scheme) of a company. Typically in India, ETFs (exchange-traded funds) don't pay out dividends to the investors. Instead, the proceeds received from the underlying securities are reinvested back into the scheme.

Which ETFs are tax free?

Do I pay taxes on ETF if I don't sell?

At least once a year, funds must pass on any net gains they've realized. As a fund shareholder, you could be on the hook for taxes on gains even if you haven't sold any of your shares.

What are 3 disadvantages to owning an ETF over a mutual fund?

However, there are disadvantages of ETFs. They come with fees, can stray from the value of their underlying asset, and (like any investment) come with risks.

How is ETF income taxed?

For most ETFs, selling after less than a year is taxed as a short-term capital gain. ETFs held for longer than a year are taxed as long-term gains. If you sell an ETF, and buy the same (or a substantially similar) ETF after less than 30 days, you may be subject to the wash sale rule.

What is the income tax rate for ETFs?

Not all ETF dividends are taxed the same; they are broken down into qualified and unqualified dividends. Qualified dividends are taxed between 0% and 20%. Unqualified dividends are taxed from 10% to 37%. High earners pay additional tax on dividends, but only if they make a substantial income.

Why is ELSS tax free?

Since ELSS funds are locked up for three years, there is no way to realize short-term profit gains. As a result, you can only realize long-term capital gains. These gains are tax-free up to Rs 1 lakh per year, and any earnings beyond this amount are subject to a 10% long-term capital gains tax.

Which ETF is best in India?

Which ETF gives highest return in India?

What is the downside of ETFs?

There are many ways an ETF can stray from its intended index. That tracking error can be a cost to investors. Indexes do not hold cash but ETFs do, so a certain amount of tracking error in an ETF is expected. Fund managers generally hold some cash in a fund to pay administrative expenses and management fees.

What is the 30 day rule on ETFs?

Watch the wash sale rule

If you buy substantially identical security within 30 days before or after a sale at a loss, you are subject to the wash sale rule. This prevents you from claiming the loss at this time.

How are US stocks taxed in India?

When calculating the tax on US stocks in India, you have to take into account dividends earned from US stocks as well. This amount is taxable at the rate of flat 25%. Hence, if the company declares a dividend of $100, then you will receive $75.

Is ETF better than mutual fund?

Both can track indexes, but ETFs tend to be more cost-effective and liquid since they trade on exchanges like shares of stock. Mutual funds can offer active management and greater regulatory oversight at a higher cost and only allow transactions once daily.

Can I invest in ETF through Zerodha?

ETFs at Zerodha: Zerodha provides every customer a brilliant opportunity to buy/sell ETFs using our trading platform, reducing costs and increasing profitability. Currently we provide CNC benefit to all our clients on ETFs.

What happens to dividends in ETF in India?

What happens to the dividends of the underlying stocks? Dividends received by an ETF are typically reinvested in the Fund.

Which Nifty ETF is best?

How long can you hold an ETF?

How long should you keep ETFs? It depends on your investment goals and how long you want to stay invested in ETFs. While a long-term ETF holding for more than three years can get you better returns, short-term returns can also be more for some ETFs.

Are international ETFs tax efficient?

Foreign-stock ETFs have all the structural tax efficiency benefits that U.S. stock ETFs do, but their tax-cost ratios tend to be a bit higher for one key reason: Foreign companies often pay higher dividends than U.S. companies, and those year-in, year-out payments lead to higher tax bills.

Does Vanguard have tax free ETFs?

Vanguard Intermediate-Term Tax-Exempt Bond ETF is designed for tax-sensitive investors with an intermediate-term time horizon and a preference for passive management. The new ETF has an expense ratio of 0.08%, compared with the average expense ratio for competing funds of 0.37%¹.