Is it always advisable for investor to opt for Dividend option in Equity oriented Mutual Fund. As on dividend there is no DDT and dividend is tax free in the hands of investor.
- Vineet Kapoor
No. You should opt for dividends only if you have periodic need for cash flows, for instance, post-retirement. If you are investing for long term goal, it is best to go for the Growth option. This will ensure that your investments make the most of compounding. Dividend payouts, if you receive them in your hands, may get spent or reinvested at low rates. There is no Dividend Distribution Tax on equity oriented funds. There is also no tax on long term capital gains (after 1 year) whether you take growth option or dividend option. Therefore tax consideration should not prompt you to go for dividends.
This article was originally published on March 20, 2017.
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