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

Under the Income-tax Act, dividend (IDCW) received by a resident individual investor from a mutual fund scheme is taxed in the investor's hands at which rate?

IDCW or dividend from a mutual fund is taxed in the investor's hands at the investor's applicable slab rate. Since the fund no longer pays dividend distribution tax, the income is added to the investor's total income as income from other sources.

  1. AAt the investor's applicable slab rateCorrect
  2. BAt a flat 10% for all investors
  3. CAt a flat 20% with indexation
  4. DIt is fully exempt from tax

Explanation

Dividend distribution tax on mutual funds was abolished, so IDCW is taxed in the hands of the investor as income from other sources at the applicable slab rate. The flat-rate and exempt options do not reflect this treatment.

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