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When a mutual funds pay dividend, they have to pay dividend distribution tax. Can an investor avoid paying Dividend Distribution Tax if he chooses the 'growth' option? Does the growth option have a tax component too? Please explain which option is better to avoid dividend distribution tax.
- Chandrakant Gupta
Dividend Distribution Tax (DDT) is a tax paid by the AMC when dividends are paid. Although dividends received are tax-free in the hands of the investors but the DDT is charged to the scheme and eventually, it is the investor that loses out in the end.
If one chooses the growth option, then the DDT amount can be saved. There is no other tax component particularly for the growth option.
This article was originally published on April 10, 2009.
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