Mutual Funds & ETFs

What is the difference between short-term and long-term capital gains on mutual funds?

The difference between short-term and long-term capital gains on mutual funds is the holding period that determines the tax rate applied when you sell. For equity funds, units held under one year produce short-term gains and units held longer produce long-term gains, each taxed at a different rate. For example, equity short-term gains are currently taxed at 20 percent while long-term gains get an annual exemption then 12.5 percent. Debt and international funds follow separate rules. Holding period changes the after-tax outcome, so the timing of a sale is itself a decision worth planning. Verify current rates before acting.

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