What is the tax applicable on the income earned by the mutual fund schemes?
A
It is a function of the type of income since dividends, short term capital gains and long-term capital gains attract different tax rates
B
Income earned by a mutual fund is exempt from taxes
C
10% plus surcharge and cess
D
It is a function of the marginal rate of tax applicable to the respective investor in the mutual fund scheme
Correct Option:
B
Explanation
The question refers to the income earned by the mutual fund scheme itself, not the income earned by investors. A mutual fund, as a trust, is generally exempt from income tax on the income it earns from its investments, subject to the applicable provisions of the Income-tax Act. Tax liability generally arises when investors receive income or realize gains, such as dividends, short-term capital gains (STCG), or long-term capital gains (LTCG).
