I invest regularly in cash and liquid funds. I want to know the impact of the budget on my net returns earned from these funds.
- Rajesh Bhansali
Individual investors who belonged to the highest tax bracket enjoyed a significant tax advantage from their investments in cash and liquid funds. The dividends that were derived from these funds were taxed at 12.5 per cent. However, this dividend distribution tax has now been increased to 25 per cent. Hence, the returns you earn will be subsequently lower. To counter this, you can move your investments from the dividend plan to the growth plan. You'll have to pay long-term capital gains tax of 10 per cent, but your long-term earnings won't suffer as much.
This article was originally published on March 11, 2013.
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