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Dividends Under DTC

Under the DTC, dividends will be taxed even when they are reinvested & not paid to investors….

As we all know that once DTC comes into force dividends will be taxed. But what about dividend reinvestment plans when no payments are made to the investor. Will it also be taxed?
- T N Munde

In the current scenario dividends from mutual funds are not taxed, hence in the dividend reinvestment option the entire dividend is reinvested in the fund. However, when DTC comes into effect the dividend will attract a 5 per cent tax before it is reinvested, even if the dividend is not paid out to investors. You may be better of countering this development by moving to the growth option and redeeming units from your holding.

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