Taxation of Mutual Fund Sale and Dividend Received


Partnership Firm has invested in Mutual Fund and received dividend up to Rs 3lac. and same mutual fund are sold.

1) What is the Taxation of Dividend ( Taxable or Exempt ) ?

2) What is the Taxation of sale of Mutual Fund and what cost to be taken in case of Dividend reinvestment .

Any income arising from mutual fund is exempt from tax as per section 10(35) of Income Tax Act'1961. However, Capital gain arising transfer of mutual fund:

In case of long term capital gain (held more than 12 months) shall be exempt from tax as per section 10(38) of Income Tax Act,1961

In case of short term capital gain (other than long term) shall be taxable at normal rates.

In case of dividend re-investment from the date of re-investment to date of sale , if it short term shall be liable to tax otherwise exempted.


mutual funds sold and gains arising in excess if 1 lacs is taxable as LTCG without indexation benefits. dividend received us exempt from tax.

for dividend reinvested actual amount invested to be taken as cost

Dear Sir,


Please quote the section under which if the long term capital exceeds INR 1 lakhs is liable for taxes.


refer section 112A

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Dividend that is paid out from a common or preferred stock is an ordinary dividend unless otherwise stated. Qualified dividends are dividends that meet the requirements to be taxed as capital gains.

The short-term capital gains (STCG) on redemption of equity fund units is taxable at the rate of 15%. The long-term capital gains (LTCG) on equity fund up to Rs 1 lakh is tax-free. However, LTCG on equity fund redemption in excess of Rs 1 lakh is taxable at the rate of 10% without the benefit of indexation.

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Giridhar said is correct even though it is long term capital gain, when it exceeds INR lakh then it shall be liable for taxes at the rate of %



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