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Bonus units of liquid mutual fund is dividend or income

kallu (Software Engineer) (113 Points)

22 July 2013

Hello experts,

I have some units of a liquid mutual fund (debt fund with growth option) in India.

Some days before Mar 31 of this year, it allotted some bonus units for free.

1)How do I treat the free units from a taxation point of view?

2)Should I treat the bonus units as dividend? Or should it be treated as regular income?

In the former case, AMC must have paid DDT on it already whereas in the latter case, it should be added be to the income?

Is my understanding correct?

Thank you.

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3 Replies

CA. Kuldeep Singhi (Entrepreneur) (424 Points)
Replied 22 July 2013

No treatment is required, just record the number of units u receive, as & when u will sell it the cost of it will be nil & the whole sale amount will be treated as STCG or LTCG as the case may be

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kallu (Software Engineer) (113 Points)
Replied 22 July 2013

Originally posted by : Kuldeep
	No treatment is required, just record the number of units u receive, as & when u will sell it the cost of it will be nil & the whole sale amount will be treated as STCG or LTCG as the case may be

Thanks Kuldeep. I think you are implying that it is to be treated as tax free dividends right? So, does it need to be shown in schedule EI "exempt income"?