Dear all
Please guide me regarding tax on Equity based Mutual Fund ( Dividend reinvestment Type ). How tax is calculated on it. i had invest an X amount in the year 2003. Now i want to redeem the amount. In between i had got dividends which were reinvested . a dividend was reinvested recently in may 2010.
How can i calculate the Tax on it.
Please guide me through
thanks in advance
Hemant
Dividend amount reinvested is exempt u/s 10(34) and the same will be added to cost of acquisition.
When u sale the mutual fund the same will be allowable as a deduction from sale price for the purpose of computing capital gains.
Dear Hemant,
1) Dividends recd by you would be tax-free.
2) Since you have chosen the "Dividend re-investment" Option, any dividend which is re-invested would be considered as a fresh purchase of the units of the scheme and hence you would have to sell such units after holding the same for more than 1 year if you want to avail of "No tax" benefit.Thus the dividend which was re-invested in May 2010 would suffer short-term Capital Gains tax if you redeem the same now.
Mr.Maheshwari,kindly confirm that my understanding is correct (I regularly follow your posts and truly appreciate your inputs).
CCI
Pro
CAclubindia
