')Investment in equity-linked mutual fund schemes and ULIPs will now be less profitable for investors, with the government proposing to levy a 5 per cent tax on the dividend paid by these entities.
At present, there is no DDT applicable to equity fund schemes or insurers on income distribution to unit or policy holders.
This norm is applicable to mutual fund schemes and insurance policies that invest over 65 per cent of the total proceeds in equity shares, or equity-oriented mutual funds.
Considering an investor has a dividend option, the quantum of income from equity-linked mutual funds or ULIPs would be slightly lower when the DTC comes into effect from 1st April, 2012.
The dividend yield of any MF scheme is calculated on the net asset value (NAV) of that scheme. When funds declare a dividend of 20-30 per cent, it is calculated on the face value of the scheme.
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Article by seeralan
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