The Union Budget 2020-2021 attempts to change the mindset of investors regarding savings and investments. First, the facts: The government has repealed the Dividend Distribution Tax (DDT) and introduced a new tax regime which gives investors an option to forego tax-saving investments. It basically provides more cash in their hands. Second, the dilemma: Avail the benefits of the new regime or continue with the old one? In this edition of Fund Insights, we discuss the case for both while weighing in the harder and softer aspects of the change for individual mutual fund investors.
More dividend money, but taxable in investors’ hands
The abolishment of DDT increases dividend money in investors’ hands, while removing the double taxation incidence that occurred previously; DDT was first deducted when received by the mutual fund and then again when received by the investor.