Dividend Distribution Tax (DDT) from Financial Year 2020 onward, will be charged at the investor level as per the new Income Tax laws. This is applicable for the investors who benefit from Dividend yields from shares and mutual funds.
Dividend returns on Mutual Funds are distributed to the investors of the fund in case of profits. These schemes pay the profits on a regular basis in the form of dividends. It doesn’t mean that these schemes pay guaranteed dividends. Dividend payment is purely based on the performance of the mutual fund objectives. The dividend distribution to the investors depends on the dividend payout option chosen at the time of investment.
In this article we will elaborately discuss about how the tax on dividends earned from mutual funds, often referred as DDT (Dividend Distribution Tax) are charged. One must be aware that, there is no action that need to be taken from the investor's side as these dividends are already tax deducted before being credited to the investor's bank accounts.