If I invest in the dividend option in an arbitrage fund for a period of less than a year, how will it be taxed?
- Sriram
Arbitrage funds are treated as equity funds for taxation purpose. Dividends from equity mutual funds are tax-free for investors. Mutual funds also don't pay any tax on dividends declared in an equity fund.
If investments in equity mutual funds are sold before a year, you will have to pay a short-term capital gains tax of 15 per cent. If investments are sold after a year, you don't have to pay any tax as long-term capital gains tax is zero on equity mutual funds.
This article was originally published on January 28, 2016.
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