SEBI has renamed dividend payout option in mutual funds as payout of income distribution cum capital withdrawal option.
In addition, the market regulator has also renamed dividend reinvestment option as reinvestment of income distribution cum capital withdrawal option and dividend transfer plan to transfer of income distribution cum capital withdrawal plan.
Sharing the rationale, SEBI said that there is a need to clearly communicate to the investor that certain portion of his capital (equalization reserve or distributable reserve) can be distributed as dividend under such option of a mutual fund scheme.
Currently, fund houses are allowed to distribute realized gains as dividend.
SEBI further said that fund houses will have to disclose the amounts that can be distributed from equalization reserve which is part of sale price that represents realized gains.
These changes come into effect from April 1, 2021.
