Its always tricky to understand exactly how you'd be taxed on various investment returns, especially mutual funds, primarily because not all of us go into detail regarding their portfolio structures. There are different categories of funds and their taxation rules change for each -
a. Equity Funds
b. Debt Funds
c. Hybrid Funds
d. Income Funds
I personally like value research magazine (www.valueresearchonline.com) for their knowledge dissemination around mutual funds. They have a decent article around the taxation of fund returns. This answers quite a lot of questions, if not all..
Further, this article goes into another interesting topic... discussing whether dividend reinvestment is better off, or is it the growth option that is better. As per their analysis, dividend reinvestment option comes off as the winner..read on..