Income Tax Calculator-Income From Other Sources: How you are taxed when money derived from mutual fund dividends
Income Tax Calculator: From 1st April, 2020, mutual fund dividends received are taxed in the hands of unit holders. As per the income tax norms, mutual fund dividend is treated as one's income and tax will be applied on the unit holder as per the income tax slab applicable on him or her.
Income Tax Rule on mutual fund dividends
Dividend is part of individual's income
Speaking on how income tax rule gets applied on mutual fund dividends, SEBI registered tax and investment expert Jitendra Solanki said, "Mutual fund dividends are treated as income from other sources and it gets added into an earning individual's annual income. At the time of Income Tax Return (ITR) filing, the income tax outgo will be decided on the basis of income tax slab in which one will fall after addition of the net annual income and the net mutual fund dividend." Photo: Pixabay
Income tax outgo calculation
Solanki said that if an earning individual's net income plus mutual fund dividends together add up to Rs 2.5 lakh per annum then there will be zero tax liability on the mutual fund dividends. However, in case the earning individual falls in Rs 2.5 lakh to Rs 5 lakh bracket after the addition of one's net annual income plus mutual fund dividends, then the earning individual will have to claim income tax rebate available under Section 87A of the income tax act. Photo: Pixabay
TDS rule on mutual fund dividends
Finance Act 2020 on TDS deduction on dividends
"As per the Finance Act 2020, 10 per cent TDS on mutual fund dividends will be applicable if the net mutual fund dividend is more than Rs 5,000. The TDS would apply even in case you have opted for dividend reinvestment scheme as reinvestment of the dividend is treated as receipt of dividend in your income," said Singhal. Photo: Pixabay