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

Under the Income-tax Act as it stood for FY 2024-25 (post 23 July 2024 changes), how are dividends (IDCW) received by a resident individual investor from a mutual fund scheme taxed?

IDCW from a mutual fund is added to the resident individual's total income and taxed at the applicable slab rate, because dividend distribution tax was abolished and the tax burden moved to the investor.

  1. AExempt in the hands of the investor
  2. BAdded to the investor's total income and taxed at the applicable slab rateCorrect
  3. CTaxed at a flat 10% regardless of income
  4. DTaxed only as long-term capital gains

Explanation

Since the abolition of Dividend Distribution Tax from FY 2020-21, IDCW is taxable in the investor's hands as income from other sources at slab rates. It is not exempt, not flat-rated, and not treated as capital gains.

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