Last Updated on February 1, 2026 at 2:53 pm
Budget 2026 has proposed that ” no deduction shall be allowed in
respect of any interest expenditure incurred for earning dividend income or income from units of mutual funds, applicable for the Financial Year 2025-26 onwards.
If one borrows money to buy shares or MFs and receives dividends or income from units (IDCW), the income will be taxed under the applicable slab (no change here). As per existing rules, the interest paid to the lender can be deducted from the income from the investments, “subject to a ceiling of twenty per cent of the gross dividend or income from units of mutual funds”.
Section 93 of the Income Tax Act, which allows such a deduction, will be amended in the Finance Bill 2026, such that “no deduction shall be allowed in respect of any interest expenditure incurred for earning dividend income or income from
units of mutual funds,” says the budget 2026 memorandum.