Equity funds held for 12 months or more qualify as long-term capital gains which are tax-free. Non equity funds incur short term capital gains tax for holding less than 3 years
08-Dec-2016 •Research Desk
Kindly confirm from which type (i.e. Liquid,equity, etc fund) of mutual fund investment the interest earned is taxable. Please also forward details regarding the tax to be paid for various amounts.
The dividend income received from the funds (in case you opt for dividend option) is tax free in your hands for both equity and debt funds. The only difference is that for debt funds, this dividend is paid out to you after the fund house pays a dividend distribution tax (DDT) of 28.33% for FY16-17.
The capital appreciation on funds are categorised as equity funds and non-equity funds for taxation. Based on the categories the gains will incur taxation as stated in the chart below:
Fund categories considered for equity taxation: Large cap, Mid-cap, Small-cap, Multi-cap, Balanced funds (equity oriented), Sector funds, etc.
Fund categories considered for non-equity taxation: Liquid mutual funds, Money Market funds, Gold funds, Infrastructure debt funds, Balanced funds (Debt oriented), Equity-International, fund of funds, etc.