How mutual fund gains are taxed
When you redeem units, the asset management company (AMC) works out your gain: redemption value minus what you paid for those units. It deducts capital gains tax at source and pays you the rest. You'll see the deduction on your redemption statement.
| Investor | Stock funds | Other funds |
|---|---|---|
| Individual / AOP | 15% | 15% |
| Company | 15% | 25% |
Example
Hamza put Rs 1,000,000 into a money market fund. A year later he redeems everything for Rs 1,180,000. His gain is Rs 180,000. As an individual, he pays 15%, or Rs 27,000, and receives Rs 1,153,000.
Dividends vs growth
Many funds offer a dividend option and a growth option. Dividends are taxed when paid, at rates that depend on the fund type: 15% for equity funds and 25% for debt or money market funds for filers, with non-filers paying more. In the growth option, you're only taxed when you redeem. For money market funds, choosing growth over dividend can mean a lower tax rate on the same return.
Compared with a bank deposit
Profit on bank deposits is taxed at 20% for filers. A money market fund taxed at 15% on redemption can leave you slightly better off after tax for the same headline return, which is one reason these funds have grown so fast. Do compare fees, though. A high management fee can wipe out the tax advantage.
Voluntary pension schemes
Contributions to SECP-approved voluntary pension funds can earn a tax credit on your income tax, within limits, and gains inside the fund aren't taxed while they stay there. If you're investing for retirement, these may be a better fit than regular mutual funds.
Shariah-compliant funds
Islamic funds follow the same tax rules as conventional ones. The fund's Shariah status doesn't change the rate.
Non-filers
If you're not on the Active Taxpayers List, AMCs deduct tax at higher rates on dividends, and the capital gains rate can be higher too. Make sure your AMC has your correct CNIC so it can verify your filer status.
On your return
Report the gain and tax deducted on your yearly return, using the AMC's tax certificate. Your remaining units go into your wealth statement at cost.
Partial redemptions
If you redeem only some of your units, the AMC works out the gain on those units only, using their average cost. The rest of your investment keeps growing untaxed until you redeem it. Many investors take out just what they need each year to spread the tax.
Switching between funds
Moving money from one fund to another, even within the same AMC, normally counts as a redemption from the first fund. Any gain is taxed at that point. Keep that in mind before switching frequently between equity and money market funds to time the market.
Questions to ask your AMC
- Is my CNIC linked correctly so my filer status is recognised?
- Can I get a yearly tax certificate showing gains, dividends and tax deducted?
- What are the management fee and sales load, and how do they affect my after-tax return?
- Does the fund offer a growth option as well as a dividend option?
Most AMCs answer these through their app or helpline in a few minutes, and the answers can change your choice of fund.
Related calculators
- Capital gains tax calculator, if you also trade shares directly on the PSX.
- Salary tax table, to see your salary tax alongside your investment tax.
- Filer vs non-filer guide, because AMCs deduct more from non-filers on dividends.
A last word: tax is only one part of a fund's return. A fund that earns two percentage points more a year, after fees, will usually beat a slightly more tax-efficient one. Choose the fund first, then use the tax rules to decide how and when to take money out.
Frequently asked questions
What is the tax on mutual fund redemption for individuals?
15% of the gain in FY 2026-27, for both stock and other funds.
Do companies pay more?
Companies pay 15% on stock fund gains and 25% on gains from other funds.
Who deducts the tax?
The asset management company deducts it at source when you redeem.
Is the growth option taxed differently from dividends?
Yes. Dividends are taxed when paid, at rates by fund type. In the growth option, tax is charged only on redemption gains.
Rates: Income Tax Ordinance 2001 and its schedules as amended by the Finance Act 2026, plus FBR's withholding tax rate card for Tax Year 2027. Results are estimates. Check with FBR or a tax adviser before acting on them.