Mutual funds can be a tax efficient instrument for investing.
Some of these benefits are given alongside. Income received from Mutual Funds Capital Gains Tax Wealth Tax Gift Tax TDS on Redemptions Sec 88 of the I.T. Act Dividends received from all mutual funds are tax free in the hands of investors,irrespective of the kind of scheme they have invested in. If the investor sells his units and earns capital gains he is liable to pay capital gains tax. If the units are held for a period of less than one year they will be treated as short-term capital gains and the investor will be taxed depending on the income tax rate applicable to him. The investor has to pay long-term capital gains on the units held by him for period of more than 1 year.