Dividend Distribution Tax Calculation

The dividend distribution tax associated with debt mutual funds (dividend payout and dividend reinvestment options) has been hiked again in this budget.

Last year, the government changed the way in which the DDT was calculated. (read more here). The DDT hike by a huge extent: from 22.073% to 28.325%.

This year, they have increased the surcharge on the DDT from 10% to 12%

DDT after Budget 2014

Tax: 25%,  Surcharge: 10%, Cess: 3%

So effective DDT rate: [(25%)(1+10%)](1+3%) =28.325%

DDT after Budget 2015

Tax: 25%,  Surcharge: 12%, Cess: 3%

So effective DDT rate:[(25%)(1+12%)](1+3%) =28.840%

An increase of 0.515%.  Thus the tax arbitrage for those in the 30% slab has further decreased to

30.9% - 28.840% = 2.06%

I think those in the 30% slab can continue to use dividend reinvestment option in debt funds to minimize (if not totally erase) short-term capital gains for less than 3 years. Read more here.

More on the budget:

New Delhi Investor Workshop on financial planning and goal-based investing

Register with the screen below or from the registration page

If you have friends or relatives in Delhi who you think could benefit from this workshop, please forward this link to them.

Get GameChanger (my second book) + Pranav's Travel Training Kit  GameChanger (hardcopy is now available for ₹279 (249 +30 for shipping) and the Travel Training Kit is available for immediate download for ₹150.

Register for the Kolkata DIY Investor meet:  May 28th2017

Get free, yet comprehensive calculators, tools and analysis delivered to your mailbox! Subscribe to get posts via email

Your subscription is successful if you are directed to the "Welcome Page"

Install Financial Freedom App! (Google Play Store)

Install Freefincal Retirement Planner App! (Google Play Store)

Find out if you have enough to say "FU" to your employer (Google Play Store)


Buy our New Book!

You Can Be Rich With Goal-based Investing A book by  P V Subramanyam (subramoney.com) & M Pattabiraman. Read more about the book and pre-order now!
Practical advice + calculators for you to develop personalised investment solutions

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete  the entire comment or remove the links before approving them.

Do let us know what you think about the article