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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Under the Income-tax Act as applicable to listed equity shares and equity-oriented mutual fund units, which of the following is the tax treatment of dividend received by a resident individual investor?

Dividend from shares and equity mutual funds is taxable in the investor's hands as income from other sources at the applicable slab rate. The company or fund no longer pays dividend distribution tax, so the investor must include it in total income and pay tax accordingly.

  1. AExempt in the hands of the investor under all circumstances
  2. BTaxable in the hands of the investor as income from other sources at the slab rateCorrect
  3. CTaxed at a flat 10% only when dividend exceeds Rs 10 lakh
  4. DTaxed as short-term capital gain at the special rate

Explanation

Since dividend distribution tax was abolished, dividends are taxed in the hands of the recipient under the head Income from Other Sources at normal slab rates. The Rs 10 lakh flat 10% rule applied to the earlier regime for the shareholder and no longer applies. Dividend is not a capital gain.

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