What is dividend distribution tax (DDT)?
A tax payable by a debt oriented mutual fund (a mutual fund that invests more than 50% of its portfolio in the debt market) before dividend is distributed to the unit holders.
What is the tax Implication on dividend received by unit holders as per the Union Budget 2011?
With effect June 1, 2011 all ‘persons’ other than an individual or a Hindu Undivided Family (HUF) will be subjected to Dividend Distribution Tax (DDT) at 30 percent instead of 20 percent on income distributed by debt funds defined by SEBI as money market & cash funds and to DDT at 30 percent instead of 25 percent on other debt funds. This change, therefore, only impacts investors in the dividend option.
However, there is no change in the position of individuals or HUFs (DDT at 12.5 percent on cash funds and 25 percent on other debt funds).
Which categories of mutual funds are exempted from DDT?
Only mutual funds of equity nature are exempted from DDT.
What are the DDT rates for mutual funds other than equity nature?
|
Nature of Fund |
Individual/ HUF |
Domestic Company |
NRI |
|
Debt schemes |
12.5% + 5% Surcharge + 3% Cess = 13.519% |
30% + 5% Surcharge + 3% Cess =32.445% |
12.5% +5% Surcharge + 3% Cess = 13.519% |
|
Money market and Liquid schemes |
25% + 5% Surcharge + 3% Cess = 27.038% |
30% + 5% Surcharge + 3% Cess =32.445% |
25% + 5% Surcharge + 3% Cess = 27.038% |