Budget ends tax advantage in MLDs, move to impact wealthy investors

Products that invest in fixed-income and derivative instruments enjoyed taxation for bonds

The Union Budget on Wednesday plugged a loophole in the taxation of listed market-linked debentures (MLDs). From Financial Year 2024, returns from listed MLDs will be taxed as short-term capital gain instead of long-term capital gain. This implies that gains from MLD investment will be taxed at the investor's slab rate (which can be as high as 30 per cent) instead of 10 per cent now.

MLDs, which are hybrid or structured products that invest in fixed-income and derivative instruments, enjoyed taxation applicable on bonds despite being more of a derivative product, the government said in the Budget note.

"The