Tax Liability on Dividend received from Mutual Fund

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  1. Sanjay Ramdasi

    Sanjay Ramdasi New Member

    I have invested amount in LIC MF Liquid Fund (Daily Dividend-Reinvestment) option. Since this is liquid fund, I have a privilege to redeem the units as per my requirement at any time.
    Whether such redemption (out of principle amount or Dividend) is taxable or it is tax free.
    I have also invested in similar funds of SBI, HDFC and L & T Mutual Funds also.
  2. ZED

    ZED Well-Known Member

    Mutual funds are capital assets and withdrawal will attract capital gain tax.
    If they are equity oriented then period of holding should be more than 1 year to qualify them to be as long term capital asset, if they are other than equity (eg debt oriented) then the period of holding should be more than 3 years to qualify as a long term capital asset.
    [Long term capital gain from equity oriented fund would be exempt.]
    [If atleast 65% of the investment is in equity then the fund will be considered as an equity fund.]

    Dividends from Mutual fund is exempt in your hands u/s 10(35). This is so because tax is already deducted theron u/s 115R.
    Last edited: Jun 11, 2016
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