Large, mid, small, multi, flexi and other equity funds in India
Ten SEBI equity categories, from large cap to dividend yield, with each rule, the India tax for FY 2026-27 and what holders in the U.S., Canada, the UK and Europe should know.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on November 5, 2026.
Equity funds in India keep at least 65% in company shares, and SEBI sorts these ten categories by company size or style. The Ten-Label Equity Sorter below helps you read a statement's category. It recommends nothing.
- SEBI minimums run from 65% to 80% in equity, by category.
- SEBI publishes no typical risk level for a category; each scheme's risk-o-meter is recalculated monthly.
- India, FY 2026-27: usually equity-oriented, so 20% short term and 12.5% long term above Rs 1.25 lakh a year.
- U.S.: usually treated as a PFIC, the practitioner view.
What SEBI requires
| Category | Rule |
|---|---|
| Large Cap | 80% in large caps |
| Large & Mid Cap | 35% large caps and 35% mid caps |
| Mid Cap | 65% in mid caps |
| Small Cap | 65% in small caps |
| Multi Cap | 75% equity, 25% each in large, mid and small (since 11 September 2020) |
| Flexi Cap | 65% equity, any size (category since 6 November 2020) |
| Focused | 80% equity, at most 30 stocks |
| Value and Contra | 80% equity each; one fund house may run both if overlap is 50% or less |
| Dividend Yield | 80% equity, mainly dividend payers |
How India taxes it (FY 2026-27)
| Holding | Rate | Note |
|---|---|---|
| 12 months or less | 20% | Short term |
| Over 12 months | 12.5% on gains above Rs 1,25,000 a year | One limit per person across all funds and shares |
| Tax deducted for NRIs | 20%, or 12.5% on the long-term part above Rs 1,25,000, plus surcharge and 4% cess | No rebate for non-residents |
Only listed Indian shares count toward the 65% tax test; SEBI counts REITs from 1 January 2026, the tax test does not. Excess tax comes back only through an Indian return.
Abroad in short
| Country | Treatment |
|---|---|
| USA | PFIC view, Form 8621 per scheme. The default method spreads a gain back over the holding period, with top-rate tax plus interest on earlier years |
| Canada | No PFIC regime. Payouts are likely foreign property income; Form T1135 applies above CAD 100,000 of total foreign cost |
| UK | HMRC's list of 2 November 2026 has 10 Indian schemes, 9 in these categories. A class not listed for the whole holding is non-reporting, so a gain is taxed as income |
| Europe | Germany: 30% exemption only if fund terms or yearly proof show over 50% equity. France: 31.4% flat tax on 2026 payouts and gains |
Our checklist
The Ten-Label Equity Sorter, per holding:
- The SEBI category and its size band or style.
- Plan, option and the date of every purchase; each SIP instalment is its own lot.
- The year's tax class from the fund house.
Mistakes people make
- Using the old 65% minimum for focused, value, contra or dividend yield funds.
- Treating the Rs 1.25 lakh limit as per fund.
Your Indian CA covers India; we prepare the U.S. side. Check figures each April.
Common questions
How do multi cap and flexi cap differ?
Multi cap must hold at least 25% each in large, mid and small caps; flexi cap moves freely.
Who decides what is large, mid or small?
AMFI, twice a year, by full market capitalisation.
Can NRIs buy these funds?
India's foreign exchange rules set no limit for NRIs and OCIs. Some fund houses decline U.S. and Canada residents by their own policy.
Official sources
- SEBI: Master Circular for Mutual Funds, 20 March 2026
- Income Tax Department: Income-tax Act 2025, section 198
- Income Tax Department: TDS rates for tax year 2026-27
- IRS: About Form 8621
- HMRC: Approved offshore reporting funds
- CRA: Questions and answers about Form T1135
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