How equity oriented mutual funds are taxed

1. Mutual funds that invest 65% or more of their corpus in equity and equity related securities at all times are called equity oriented mutual funds.

2. Gains on equity oriented mutual funds held for less than a year are treated as short-term capital gains and taxed at 15%.

3. Gains on equity oriented mutual funds held for a year or more are treated as long-term capital gains and taxed at 10% for gains exceeding Rs 1 lakh in a year.


4. For equity mutual funds invested on or before 31 January 2018, gains till that date will be considered as grandfathered and will be exempt from tax.

5. Dividends from equity mutual funds are tax-free in the hands of investors but they are liable for a dividend distribution tax of 10% (11.648% with surcharge and cess).

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)