Taxation on daily dividends debt fund

Save Share

This query is : Resolved

Rajesh Jadhav (Querist)
Follow

28 January 2020 Dear sir,
Can you please confirm whether following fund dividend is taxable or not? Dividend is reinvested in units daily.

LIC MF Banking & PSU Debt - Direct Plan - Dividend - Daily

Thanks

Rajesh Jadhav

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
Follow

26 May 2020 In case of debt funds or non-equity funds, if you sell your investments after less than three years of holding, gains or returns are treated as short-term capital gains for taxation purpose. Short-term capital gains are added to your income and taxed according to your applicable income tax slab.

If the holding period of debt fund investments is more than three years, returns are considered as long-term capital gains for taxation purpose and taxed at 20% with indexation benefit. Indexation means adjustment of gains after taking inflation into consideration. So if you have invested in a debt fund for over three years, you will be paying taxes only on the returns over and above the inflation-adjusted initial investment.

Dividends from debt mutual funds are tax-free in the hands of the investor but dividend payouts from debt mutual funds are subjected to a dividend distribution tax of 29.12% (including cess and surcharge). This effectively reduces the in-hand return for investors.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now