How & when does a mutual fund gives returns? Explain with example?

Example,I buy tax saving TATA Mutual Fund for Rs.50000,lock period of 3 yrs,NAV=41.How and what returns will I get at the end ?

There are actuall 3 ways for a mutual fund to pay a return.
1. Capital Gains would be paid when a mutual fund manager decides to close out a position in a specific stock that fund owes. Now if the stock is sold for a premium (above cost of what it was bought for) they will get money back to distribute to the shareholders. Ex. Manger bought 100shares of Coke for 23.00 sold for 25.00 has capital gains of 200.00
2. Dividends are the second way. When a stock that the fund owes pays a divdend it can be paid back to the shareholders of the fund. Ex. coke declares a 5 cent dividend per share. For every share the fund owns they will receive 5 cents. Now if the fund owns bonds rather than stocks whenver they receive interest payments from that bond they will pay a dividend.
3 Is to sell your mutual funds. If you sell higher than what you bought for you gain money. Simple enough.

As far as when do they acutally pay out returns like in 1 and 2. Not exactly possible to say. Since the return on these investments are guaranteed you aren't always going to get a return. Say you do a mutual fund company is required under the investment company act of 1940 to pay out income atleast annually. Usually at the end of the year. They will however usually pay dividends quarterly if there are any and capital gains are usually annually to semi-annually.

Two ways: distributions (capital gains and dividends) may be paid out by the fund periodically (you may or may not choose to have these reinvested into the fund), which would add to the returns, but the bulk of the returns will come from the sale of the shares (sales price - purchase price + distributions = returns).