Is dividend from mutual funds taxable?

Yes — since FY 2020-21, dividends from mutual funds are taxed at the recipient's slab rate. TDS at 10% is deducted by the AMC if total dividend in a year exceeds ₹5,000.

Educational guide

Capital Gains Tax on Mutual Funds — Equity, Debt & Hybrid

Mutual fund taxation depends entirely on the fund's equity exposure. Three buckets — equity, debt and hybrid — with three different tax tracks.

// equity-oriented mutual funds (>65% equity)

Held ≤ 12 months → STCG @ 20%. Held > 12 months → LTCG @ 12.5% on aggregate gains above ₹1.25 lakh/year. Same treatment as direct equity.

// debt mutual funds

Bought on/after 1-Apr-2023 → always slab rate regardless of holding (Finance Act 2023 carve-out). Bought before 1-Apr-2023 → held ≤ 24 months: slab; held > 24 months: 12.5% without indexation (Budget 2024 update).

// hybrid funds — the equity test

If the fund holds > 65% in equity → equity tax treatment. Between 35–65% equity → debt MF treatment. < 35% equity → debt MF treatment. The 65/35 test is applied based on the fund's quarterly average exposure.

// frequently asked questions

Each SIP installment is a separate purchase and follows FIFO accounting. The holding period for each installment is counted from its own purchase date — so partial redemptions can mix STCG and LTCG.