What
is Dividend Distribution Tax?
Dividend Income from the Debt and Fund of
Funds schemes only will attract the
dividend distribution tax @ 12.5% for
Individuals and 20.00% for the
non-individuals. The dividends in the
hands of the investor will be completely
tax-free.
However, the Debt-oriented funds have to
pay the DDT while Equity oriented funds
exempt from it.
What
is Capital
Gains Tax?
It is tax is paid by the investor to the
tax authorities while they filling the
income tax returns. More over the capital
gains of the equity oriented funds are
exempt from tax if your holding period
exceeds one year. When you sell any asset
you own (house, land, shares, mutual fund
units, gold, debentures, bonds), and you
make a profit on the sale, it is known as
capital gain.
What
is Securities Transaction Tax?
Equity oriented funds are subject to
securities transaction tax at the rate of
0. 2 percent at the time of selling the
funds units. This charge is deducted when
you redeem your investments.
What
are the tax benefits for investing in
mutual fund units?
Dividend income from mutual fund
units will be exempt from income tax with
effect from July 1, 1999. Further,
investors can get rebate from tax under
section 80 (C) of Income Tax Act,
1961 by investing in Equity Linked Saving
Schemes of mutual funds.
Do
I have to pay any tax on equity funds?
These are funds that invest in shares of
companies (diversified equity funds and
sector funds). They also include balanced
funds, which have more than 65% of their
total investments in equity.
Dividend income from an equity-oriented
fund is tax-free.
If
I sell my equity funds units before I
complete a year do I have to pay any tax?
If you sell the units within a year of
buying, it will attract a short-term
capital gains tax of 10%.
What
if I sell my equity funds units after a
year then is there any tax that I have to
pay?
If you sell the units after a year, no
long-term capital gains tax.
What
tax has to be paid when dividend is
declared by debt funds?
While dividend income is tax-free in the
hands of the investors, it attracts a
dividend distribution tax of 12.5% (plus
surcharge and cess) paid by the mutual
fund, has to be is borne by investors.
What
if I sell my debt fund units after
completing one year?
If you sell the units after a year, you
will have to pay a long-term capital gains
tax of either 10% without indexation, or
20% with indexation, whichever is lower. Indexation
is used to calculate tax when
inflation is taken into account. This
is good because it reduces the amount of
capital gain and the amount you end up
paying as tax.
What
if I sell my debt fund units before a
year?
If you sell the units within a year, the
short-term capital gain will be clubbed
with the income of the individual
investor, to be taxed as per the slab
system.
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