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

Under the Income-tax Act as applicable to mutual fund investors, dividend received by a resident individual from a mutual fund scheme is taxed in the hands of the investor under which head of income?

Dividend or IDCW received from a mutual fund scheme is taxed in the investor's hands under the head Income from other sources, at the investor's slab rate, because it is a distribution of income and not a gain arising from transfer of units.

  1. AIncome from other sourcesCorrect
  2. BCapital gains
  3. CProfits and gains of business or profession
  4. DIncome from house property

Explanation

Dividend (IDCW) paid by a mutual fund is taxable in the investor's hands as income from other sources at the applicable slab rate. It is not a capital gain because no transfer of units takes place. Business income applies only if units are held as stock-in-trade.

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