Do I need to pay tax on mutual funds?

In terms of taxation, the first thing you need to be aware is that any kind of dividend that you earn on mutual funds is completely tax free.

When it comes to equity mutual funds, if you stayed invested in it for more than a year, it is called long-term capital gains. This is again completely free for you. If you have selling something under a year then it qualifies as a short-term capital gain where you pay 15 percent as tax.

In terms of debt mutual fund, it is little different. When you are invested in something for over a year again being long-term capital gains, you need to pay 10 percent without indexation and you need to pay 20 percent with indexation which is typically calculated for you by your chartered accountant. When it is short-term capital, it falls in the same income tax slab that you paid for the rest of your income.