Dividend Income from MIPs of Mutual Fnds

Currently, dividend income from periodic income plans (monthly, quarterly etc) of mutual funds e.g. Reliance MIF (MD) is exempt from income tax. Will this change in the new direct tax code, to be implemented from April 2012

asked May 22 '11 at 21:58 by PMD 1111

Once Direct tax code comes into play, Equity mutual funds will also attract a dividend distribution tax of 5% tax. But this will be paid by mutual fund company and investor will get dividend after this tax deduction.

Direct code has removed dividend distribution tax on Debt and non-equity mutual funds. But now they will be taxed as your income. Dividend will be added to your taxable income and will be taxed as per your slab rate. Plus there will be 10% TDS in case dividend is more than 10,000 Rs. (20% in case of NRI and companies).

Now growth option makes more sense after DTC.

answered May 25 '11 at 02:19 by Pankaj Batra 5.2k320

I think the 5% is for equity funds and the funds will pay that tax, not the client/receiver. However, what about the MIPs,which are debt funds or at best hybrid.
(May 27 '11 at 20:50) PMD

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Asked: May 22 '11 at 21:58

Seen: 2,310 times

Last updated: May 28 '11 at 09:38