I am a senior citizen and I want to invest my fixed deposit maturity proceeds to a debt fund for at least three years. I want a regular income every quarter. Should I opt for a dividend payment option or opt for a growth option and redeem the accumulated growth every quarter?
- PS Thete
If you are in the lower tax bracket of 10 per cent or 20 per cent, it may make sense to go for the growth option and redeem a fixed amount every three months. This is because the applicable tax rate (10.3 per cent or 20.6 per cent) on capital gains is much lower than the dividend distribution tax (28.84 per cent) mutual funds pay on declared dividends. However, those in the highest tax bracket of 30 per cent may save a little by opting for the dividend option because of the marginal difference in tax rates (28.84 per cent DDT vs 30.9 per cent applicable tax slab).
This article was originally published on September 29, 2015.
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