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

Under the Indian income tax law currently taught in the NISM-Series-V-A workbook, how is a resident individual investor taxed on dividends received from a mutual fund scheme?

Dividend or IDCW from a mutual fund is taxable in the investor's hands at the applicable slab rate, as income from other sources. The fund no longer pays dividend distribution tax, so the dividend is not exempt and is not treated as a capital gain.

  1. ADividend is exempt in the hands of the investor
  2. BDividend is taxable in the hands of the investor at the applicable slab rateCorrect
  3. CDividend is taxed at a flat 10% only if it exceeds Rs 5,000
  4. DDividend is taxed as long-term capital gains

Explanation

Since the abolition of Dividend Distribution Tax, the dividend (IDCW) is taxed in the investor's hands as income from other sources at the slab rate. It is neither exempt nor a capital gain. TDS also applies to resident investors when the dividend exceeds the prescribed threshold.

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