It depends on the type of mutual fund you’ve invested in.
If it’s a debt mutual fund, the gains will be taxed according to your income tax slab. So, the rate will vary based on your personal income.
But if you’re dealing with an equity mutual fund (one that invests in stocks), you’ll be taxed under long-term capital gains (LTCG) at a rate of 12.5%. However, you get a break here: the first Rs 1.25 lakh of profit from equity gains in a financial year is tax-free.
For example, if you earn Rs 2 lakh from equity mutual funds and shares in a financial year, the first Rs 1.25 lakh is exempt from tax. The remaining Rs 75,000 will be taxed at the 12.5% LTCG rate.