As India enters a new era of mutual fund taxation from FY 2024–25 (AY 2025–26), a real-life case from Tax Buddy, a leading tax advisory platform, underscores how investors often lose returns — not because of market risk, but due to poor portfolio structure. The government’s revised capital gains tax rules for mutual funds have added another reason to rethink how investors diversify and manage their holdings. Advertisement

Tax Buddy shared that their client thought more funds meant more returns. But he was wrong.

When Karan, a salaried professional, started investing in mutual funds, he believed that owning more funds meant higher returns. Over five years, he spread his Rs 10 lakh portfolio across 10 mutual funds, assuming that a wide spread would lower risk and increase performance.

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