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

Under the Income-tax Act as taught in NISM-Series-V-A, which of the following is the tax treatment of dividend (IDCW) received by a resident individual investor from a mutual fund scheme?

IDCW or dividend received from a mutual fund scheme is taxable in the hands of the resident individual investor at the applicable slab rate, as income from other sources. It is neither exempt nor treated as capital gain, because dividend distribution tax no longer applies to funds.

  1. AIt is exempt from tax in the hands of the investor
  2. BIt is taxed in the hands of the investor at the applicable slab rateCorrect
  3. CIt is taxed at a flat 10% in the hands of the investor
  4. DIt is taxed as long-term capital gain

Explanation

Since the abolition of Dividend Distribution Tax, IDCW is taxable in the hands of the unit holder as income from other sources at the investor's slab rate. It is not exempt and not treated as capital gain. TDS may also apply above the prescribed threshold.

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