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Mismatch in debt fund dividends

The dividend that you get from any debt fund is after deduction of Dividend Distribution Tax, which would be less than the announced gains...

I had invested Rs 50,000 in Templeton India TMA Super Inst Direct-DD on May 13, 2013 and have got return of Rs 273. That amounts to an absolute return of 0.545 per cent over last month. However your site shows last one-month absolute return (as on June 12) at 0.7 per cent. Why this disparity?
-S K Garg

The dividend that you get from any debt fund is after deduction of Dividend Distribution Tax. The gains from mutual fund that you see on our website take into account only the actual dividend you receive. Templeton India TMA Super Inst is a liquid fund and the dividend distributed by the fund is taxed at 25 per cent plus 3 per cent cess for individuals. The fund house distributes dividend after deducting the DDT from the dividend. Suppose a liquid fund declares a dividend of Rs 10, then an individual will get Rs 7.17 as dividend and Rs 2.835 will be deducted as tax.

There is no difference in returns under the growth or dividend option of a scheme, as they share the same portfolio. However, in the dividend option, the gains that the fund earns are distributed as dividends, while in case the growth option, the gains remain invested in the fund and appreciate in value.

Since you have opted for daily dividend option you will get the daily dividends as gains while the net amount invested in the fund will always remain Rs 50,000. But in the growth option the daily gains will get accumulated with the principal investment of Rs 50,000 and will grow in value.

In Templeton India TMA Super Inst Direct-DD fund, the NAV of the growth option has grown from Rs 1,765.29 to Rs 1,777.27 between 13th May and 12th June 2013, while in the daily dividend option the NAV has remained at Rs 1,001.0741 as the fund has declared daily gains as dividend. The fund has declared a dividend of Rs 273 over this period on a sum of Rs 50,000.



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