Individuals to pay Tax on Dividends from Shares and Mutual Funds!

We need to pay Tax on Dividends from Shares and Mutual Funds as per slab from 1st April 2020

budget 2020 tax as per slab on dividends

Published: February 1, 2020 at 3:08 pm

Last Updated on

The finance minister announced today that tax on dividends from shares and mutual funds (both equity and debt) will be taxed as per slab of the recipient.

The finance minister said: “The dividend shall be taxed only in the hands of the recipients at their applicable rate”

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Thus the flat rate at which DDT was taxed for shares and mutual funds at source (by the company or mutual fund house) will be removed.  The govt believes they will be able to track dividends with the advent of technology and deduction at source is not longer required.

This is a good move with respect to mutual funds as the growth option will be become the naturally preferred option and mis-selling will be avoided.  Stockholders will certainly feel the pinch as they now have to pay tax as per slab on the dividends received.

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  1. This is positive for mutual funds since entire dividend from companies will get reinvested instead of 80% of dividend after DDT which will enhance returns of growth option.

    Now companies may prefer buybacks(20% tax) since promoters in big companies may be in highest bracket(42%)

    1. Are you mixing up the dividends received by MF from the stocks in which it has invested and the dividend that MF pays to individuals who invest in MF ?

  2. Does it effect the Dividend Reinvest option as well wherein the dividend is not coming in hands of investor, but gets reinvested? The reason investors choose this option over growth was because they didn’t have to pay STCG if they withdrew/redeem money before 36months. So will that still be a viable option from April 2020 or whether from April 2020, all Dividend Reinvest option will also be subjected to tax on STCG?

    1. I don’t think the FM said anything about withdrawing the 10L exemption limit on dividends on existing tax regime. So in my opinion we still have that exemption in place.

  3. Hi, doesn’t this give a chance for MNCs to start paying higher dividends as they would not be taxed and they can return higher capital back to their country of origin.

    Also, isn’t an Indian promoter being encouraged to re route his shareholding off shore so that the same dividend received by the promoter via his off shore holding of the shares helps him save on taxation?

    I’m a newbie and just trying to make sense of the new tax regime.

    Also can anyone guide on how to go about building a divivdend portfolio.


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