Is the interest earned on Mutual funds tax free?

If a person is investing in Mutual funds (other than ELSS) for a long term say 3 years. Is the interest earned and principal in this way tax free?

5 Replies to “Is the interest earned on Mutual funds tax free?”

  1. Normally mutual fund do not pay interest. I think you have debenture. Even if you have any mutual fund which pay interest then it will be taxable. Principal amount cant be taxable. Interest received will be taxed as income from other source.

  2. r u saying interest income it is called as dividend which is earned from mutual funds and it is tax free provided the fund is registered with SEBI


  3. Dear,
    there is some problems in your question ? long term equity fund no tax.all other funds have tax.
    Pls surf

  4. Returns from Mutual funds are of 2 types: Dividend & Growth.

    These returns are capital gains. LTCGs from Mutual funds (even ELSS)are tax free.

    What do you mean by “is principal in this way tax free?” ? If you are asking about tax benefit on investment, then only ELSS is eligible.


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