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Mutual Funds

Ramanathan (Article Assistant) (135 Points)

13 September 2007

What is the difference between income from units of mutual funds and dividend declared by a mutual fund?
How is the income from units of Mutual fund realised by a unit holder?

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DINESH NAGPAUL (INCOME TAX AND FINANCIAL ADVIS) (59 Points)
Replied 14 September 2007

Income from mutual funds is deemed to be earned when you repurchase(sell) your mutual funds and by that sales you get some profit. It is totally tax free if the holding period of that mutual funds was more than one year and mutual fund nature was equity oriented. Mutual funds (equity oriented) dividend received or accrued is also your tax free income subject to certain exceptions. Dividend is actually does not create benefits for the investor because as and when dividend is declared the NAV of that mutual funds declines accordingly. On the other hand if the value of Mutual funds increases ( as NAV of that fund increases ) that becomes your original income Dinesh Nagpaul nagpauldinesh @ yahoo.com

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tushar jain (Service) (107 Points)
Replied 14 September 2007

There are only two possible sources of income from Mutual Funds 1. Capital Gains. 2. Dividend. and as the name suggests Dividend income is the income by way of dividend declared. Hence income from units of mutual fund shall mean capital gains arising out of sale of units. Issue of any bonus units does not amount to income. Hence income from units is cap. gains and dividend income is.....