Is Mutual Fund Exempt From Tax? 
That is a great question ! The answer depends upon what the mutual fund is invested in . If the fund is involved in municipal bonds , -LRB- City , State or Government bonds issued to fund public projects -RRB- then you will not pay taxes on the profits that you may see . If your mutual fund is involved with stock funds , then you will pay one or more taxes . If you are paid a cash dividend , then your income taxes will be due on that payment . If the stocks increase in value , you will pay capital gains on the difference . I hope that helps . Thanks for asking ! 