Taxation of dividends of debt mutual funds
All dividends received from debt mutual funds are tax free in the hands of the investor(Individual/HUF). One does not gave to pay any tax on it.
Capital Gain Taxation
The long term gain is taxed at 10% without indexation and 20% with indexation.
The short term capital gain is added to the taxable income of the individual and taxed according to applicable tax slab.
Plus 3% Education Cess in both cases.