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Salaried Individual Queries Tax on Dividends Received from Mutual Funds

T S Khurana |367 Answers |Ask -Follow

Tax Expert - Answered on Aug 06, 2024

A certified management accountant since 1993, T S Khurana is a fellow member of The Institute of Cost Accountants of India. His areas of expertise are income tax, specifically litigation cases, and GST.

Since the last 21 years, he has also been providing expert advice on financial matters, including investments and diversification of funds, and wealth building in the long term to his clients.
He believes that investment in real estate is the safest way for better returns and wealth generation over a period of time.

A former chairman of the Chandigarh Chapter of Institute of Cost Accountants of India, T S Khurana has also served as member of its technical committee.... more

Question by Narender on Aug 01, 2024Hindi

Money

Hi Sir, I am a salaried class person, aged 57 years. I am paying Income Tax regularly since last 20 years. My question is why am i liable to pay tax on dividend received on mutual funds as i am investing my hard earned money after paying due taxes (Income Tax). The profit I got is from the money that saved after paying tax.

Ans: Income Tax is paid on the Income earned, may be from any source. If we go after your argument, then why business men should pay tax on their business income.
Dividend is your additional income from investments, hence it shall be taxed.
Most welcome for any further clarifications. Thanks.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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The tax authorities deducted tax on dividend from mutual funds. I want to know which form should be used for filing (ITR1 or ITR2). I would also like to know the exemption limit for dividend from mutual funds. Can we file with ITR1 under income from other sources and show the dividend amount? Please clarify.

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My father passed away last year.He had way back in 2000 invested money in mutual funds.After his death i got the mutual funds transferred in my name.There are few mutual funds for which i am receiving payout which is credited to my saving account and i will add this amount to my total income and pay relevant income tax . There are few mutual funds where as i understand the dividend/profit received is converted into units and added to the existing units is this taxable or i have to pay tax only when i redeem the mutual fund.

Ans: Hello and thank you for writing to me. Please accept my condolences on the passing of your Father.

The units on which are you are receiving payouts will be under the IDCW Payout Option, previously known as the dividend payout option.

The IDCW Reinvestment option is where you the AMC declares a payout and then uses that amount to allocate additional units to you at the then prevailing NAV. Under the IDCW payout option, as you a payout is declared, you need to pay taxes on it despite not having received the funds.

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My father passed away last year.He had way back in 2000 invested money in mutual funds. After his death i got the mutual funds transferred in my name. there are few mutual funds for which i am receiving payout which is credited to my saving account and i will add this amount to my total income and pay relevant income tax. There are few mutual funds where as i understand the dividend received is converted into units and added to the existing units is this taxable or i have to pay tax only when i redeem the mutual fund. IF it is to taxed than how do i find the dividend received for each mutual fund . Thanking you in advance

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If the fund is in the dividend reinvestment option, then for the dividends reinvested also, you need to pay tax.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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