Investing in mutual funds can be an effective way to build long-term wealth, but it’s important to understand how your gains are taxed. LTCG tax on mutual fund refers to the Long-Term Capital Gains tax applicable when you hold mutual fund units for more than one year before selling them. This tax applies differently to equity and debt mutual funds, depending on the nature of the investment.

Before diving into taxation, it’s crucial to understand what is NAV — the Net Asset Value. NAV represents the per-unit market value of a mutual fund. It is calculated by dividing the total value of all securities held in the portfolio, minus liabilities, by the number of outstanding units. NAV helps investors determine the current worth of their investment and is essential for understanding capital gains when units are redeemed or sold.

For equity-oriented mutual funds, LTCG tax on mutual fund is levied at 10% on gains exceeding ₹1 lakh in a financial year, without the benefit of indexation. Short-term capital gains (for units held less than one year) are taxed at 15%. In contrast, for debt mutual funds, gains are added to the investor’s income and taxed as per the applicable income tax slab, depending on the investor’s holding period and tax bracket.

Investors can plan their redemptions wisely to minimize the tax burden. Holding investments for longer durations, making use of tax exemptions, and monitoring portfolio performance through the NAV can help in optimizing post-tax returns.

In conclusion, understanding both LTCG tax on mutual fund and what is NAV is essential for every investor. This knowledge enables informed financial decisions, effective tax planning, and smarter investment strategies for long-term wealth creation.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.