By introducing a 10% tax on dividends distributed by equity funds, the government has bridged the anomaly between equity and debt funds which pay dividend distribution tax (DDT) of 28.84% in case of individuals. “The 10% tax on dividends declared by equity mutual funds is still lower than the 30% tax on dividends paid by debt and liquid funds,” says Kunal Bajaj, CEO, Clearfunds.com, a SEBI Registered Investment Advisor. Kunal believes that the DDT will clamp down mis-selling in balanced funds. “This will reduce the mis-selling of balanced funds that declare a monthly dividend out of equity gains but are misrepresented as ‘income’ products.”
