Budget 2013 saw the rate of dividend distribution tax (DDT) on debt funds going up from 12.5 per cent to 25 per cent, thereby taking away the major calling card of debt funds vis-a-vis bank FDs which are taxed at 30 per cent.
But not all is lost. Growth option should be the clear choice for those investing in debt funds for more than 12 months as withdrawal from this option will get the indexation benefit after a year.
Another change was regarding monthly income plans (MIPs) which will now carry a DDT of 28.33 per cent. Now, it does not make sense for an investor in 10-20 per cent tax bracket to invest in the dividend option of MIPs and pay such steep DDT. Such investors should withdraw their investments through the systematic withdrawal plan (SWP) offered by the funds. Even investors in the highest tax bracket, holding dividend option, should choose the growth option and start their SWP after one year.
Fund houses also offer fixed withdrawal option which regulates the periodicity and the quantity of the withdrawal in a tax efficient way.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
