One mutual fund agent advised me to invest for superannuation benefits in mutual funds because monthly or yearly dividends received are not taxable, whereas interest received on bank fixed deposit are taxable if it exceeds Rs.10,000 per year. Which income tax guidelines should I consider here?
—Kuntal Mitra
There are quite a few queries embedded in your question. Firstly, about taxation of bank deposits.
Please note that the Rs.10,000 exemption from taxes applies only to savings bank interest accumulated in a year, and not to fixed deposit interest. In the case of fixed deposits, the entire interest amount earned in a year is taxable at your marginal income tax rate.
Second comes taxation of dividends from mutual funds.
It is true that dividends from funds are tax-exempt in the hand of an investor. However, only those from equity funds are truly tax-exempt since they do not suffer dividend distribution tax (DDT).
