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

Under the Indian income-tax law as currently taught for mutual fund distributors, how is the dividend (IDCW) received by a resident individual investor from a mutual fund scheme taxed in the investor's hands?

IDCW from a mutual fund is added to the resident individual's total income and taxed at the applicable slab rate, as income from other sources. It is not exempt and is not deferred until redemption, because it is taxable when received.

  1. AExempt from tax 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% with no slab applicability
  4. DTaxed only when the units are redeemed

Explanation

IDCW received from mutual fund schemes is taxable in the hands of the investor as income from other sources, at the normal slab rate. It is not exempt, and tax does not wait for redemption. A flat 10% rate does not apply to resident individuals.

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