Dividend on Mutual fund

Dividend received from Mutual funds are exempt u/s.10(35) of I.T.Tax Act 1961. As per this sectilon interest on units of a Mutual Fund on or after April1,2003 is exempt iln the senses it i does not form a part of total income. The law olystipulates that such mutal fund should be notified for exemption u/s.10(35) of the Income.tax Act. It does not make any other categorical difference as to the nature of mutual funds or to the objects of the Mutual funds. So it doesnot matter if it is debt oriented Muftual fund .Whatone earns on Mutual Fund is not Divdend, it is in nature of intrerest. Hence the ilnterest earned on Mutual Fund is exempt from taxatilon at the hands of receiver. Though it is a diferent issuje whether Security Transactilon tax is to be deducted. Rstricting my answer to the question posed i can say that what is received on the linvestment of Units under Mutual Fund is in the nature of ilnterest and such interest are exempt u/s 10(35) of the Income-tax provided the mutual

Well its mwntioned clearly on the statement and terms & conditions of the Mutual Fund that it is a dividend .....So How can u say that it's an Interest......Plz justify??

No, if dividend is based on debt mutual fund. It is to be treated as interest income. Coz in section 10(35) , dividend is tax free for mutual find which are equity oriented ie. which invested minimum 2/3 of amount in equity market. Gain arrising from debt mutual fund is to me treated like other capital asset and will be taxable. It is nothing but like bond investment where return is not confirmed.

According to which section the tax paid on short term capital gain of debt mutual fund is as per the tax slab of the assessee?