Mutual Fund Basics for Indian Investors: NAV, Units, Types and Taxation

Quick answer

A mutual fund pools money from many investors to buy a portfolio of securities. NAV = (total assets − liabilities) ÷ units. Equity LTCG (>12 months) is taxed at 12.5% above ₹1.25L gain; STCG at 20%. Debt fund gains are taxed as per income slab (no indexation from FY 2023-24 onwards).

When this matters

This is useful when you want to compare scenarios using your own numbers instead of generic rules. It is designed for Indian households using Niyamfin calculators for private, browser-side estimates.

Key numbers or assumptions

• Expense ratio reduces returns annually — a 1% difference on a 20-year investment can reduce corpus by 15–20%.
• SEBI categorises funds into 36 defined categories to prevent overlapping or misleading names.
• Direct plans have lower expense ratios than regular plans — the difference compounds significantly over time.

Example calculation

₹10,000 invested at NAV of ₹50 buys 200 units. If NAV rises to ₹65, the investment is worth ₹13,000. LTCG = ₹3,000. If within ₹1.25L annual limit, no tax applies.

Common mistakes

• Chasing last year's top-performing fund — past returns don't guarantee future results.
• Redeeming during market falls, converting paper loss to real loss.
• Ignoring the exit load (typically 1% if redeemed within 1 year for equity funds).

What to do next

Use the SIP calculator to see how your monthly investment compounds over time. Then use the MF returns calculator to measure CAGR on any past investment.

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