If you are in a lower tax slab, say 5% or 20%, the dividend option is tax efficient but most investors are in the 30% tax bracket. In the growth option, to get the benefit of a lower tax rate, you have to hold the MF for three years. In the LTCG, there is a defined tax rate of 20% on the gains. But there is the benefit of ‘indexation’ by virtue of which the effective tax rate comes down significantly. The effective tax rate, as a percentage of your long term capital gains, is ₹1.45 /₹21 = 6.9%.

Source: The Hindu March 29, 2020 16:52 UTC