Capital gains tax and Dividend Distribution Tax (DDT) are generally applied to these funds. When your fund house pays dividends, an amount of 10% is deducted from the source before making the payment.Similarly, when you redeem the units and earn capital gains, these are also taxable.However, the percentage rate varies based on the holding period. This means if the holding period of your gains is less than a year, it is taxed at 15%. Any gain with a holding period exceeding one year is taxed at 10% without indexation benefits. Note that capital gains up to ₹1 Lakh are not taxable in this case.