Any income arising from mutual fund is exempt from tax as per section 10(35) of Income Tax Act'1961. However, Capital gain arising transfer of mutual fund:
In case of long term capital gain (held more than 12 months) shall be exempt from tax as per section 10(38) of Income Tax Act,1961
In case of short term capital gain (other than long term) shall be taxable at normal rates.
In case of dividend re-investment from the date of re-investment to date of sale , if it short term shall be liable to tax otherwise exempted.
Dear Sir,
Please quote the section under which if the long term capital exceeds INR 1 lakhs is liable for taxes.
Dividend that is paid out from a common or preferred stock is an ordinary dividend unless otherwise stated. Qualified dividends are dividends that meet the requirements to be taxed as capital gains.
The short-term capital gains (STCG) on redemption of equity fund units is taxable at the rate of 15%. The long-term capital gains (LTCG) on equity fund up to Rs 1 lakh is tax-free. However, LTCG on equity fund redemption in excess of Rs 1 lakh is taxable at the rate of 10% without the benefit of indexation.
Giridhar said is correct even though it is long term capital gain, when it exceeds INR lakh then it shall be liable for taxes at the rate of %
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