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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

For a resident individual investor, which of the following correctly describes how dividends (IDCW) received from a mutual fund scheme are taxed under the current income-tax law?

IDCW from mutual fund schemes is taxable in the investor's hands at the individual's applicable slab rate, under income from other sources. The fund no longer pays Dividend Distribution Tax, so the income is not exempt and is not treated as a capital gain.

  1. AExempt from tax in the hands of the investor
  2. BTaxed in the hands of the investor at the applicable slab rate as income from other sourcesCorrect
  3. CTaxed at a flat 10% only if the dividend exceeds Rs 5,000
  4. DTaxed as long-term capital gains at 12.5%

Explanation

Since the abolition of Dividend Distribution Tax, IDCW is taxable in the hands of the unit holder. It is treated as income from other sources and taxed at the investor's slab rate. It is not exempt and not a capital gain.

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