As a tax-efficient investment, mutual funds provide expert money management as well as help you to achieve your financial goals. A Specified Mutual Fund (one that invests less than 35 percent of its proceeds in domestic equity shares) will not receive an indexation benefit when calculating long-term capital gains. Taxation on debt mutual funds will now be determined by the applicable slab rates., Investing in mutual funds can result in profits that may be taxed as `capital gains.` Some tax deductions can also be availed of in certain circumstances. The taxation rate for capital gains from mutual funds depends on the holding period and type of mutual fund. The funds can be classified into Equity funds, Debt funds, Hybrid equity-oriented funds or Hybrid debt-oriented funds.