What are taxes and charges applicable on mutual funds and returns

Mutual funds are one of the most tax efficient investment options in our country. Capital appreciation in equity mutual funds held for a period of more than one year is tax free. Dividends paid by equity mutual funds are also tax free. Capital appreciation in debt mutual funds held for a period of less than 3 years will be taxed as per the investor’s income tax rate. For more details on mutual fund taxation, please read our post, Know your Mutual Fund tax implications in FY 2016 17.

The charges of mutual fund schemes are priced (as expense ratios) in the Net Asset Value (NAV) of the units. Expense ratios vary from scheme to scheme (to see expense ratios of mutual fund schemes, please use our Mutual Fund Information tool). No additional charges are payable to the Asset Management Companies (AMCs). Most financial advisors / mutual fund distributors do not charge any money from the investors for processing mutual fund applications and for other services like additional purchases, fund switches, redemptions etc (but a few financial advisors may have some charges, depending on the nature of their service).

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