According to the notification, on the implementation of the plans, a 10% tax will be imposed on dividend generated from mutual funds investments into equities, if the total income, including the dividends received by an assessee sums up to over Rs 10 lakh.
At present, the investments under mutual funds are exempted from taxation under the section 1023D of the I-T Act. While only the individuals, firms or Hindu undivided families receiving dividends over Rs 10 lakh from domestic companies in a single fiscal year are subjected to 10% taxation.
From the next financial year, all the assesses will be brought under the ambit of taxation according to the recent plans of the I-T department, however, the entities specified that domestic companies will be exempted.
Market experts speculate that the taxation of dividends will lead to an exit of Rs 740 crore per annum worth investors. The equity-linked MF industry is worth over Rs 7 trillion, while the average dividends that the companies pay was about 1.4% per year, totalling to Rs 7,400 crore, that will be subjected to a taxation of 10%.
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