What Is In Store For An MF Investor?

Despite abolition of DDT, investors should avoid reacting by redeeming their investments

- Himali Patel

Given the severe economic slowdown, the Union Budget 2020 was nothing short of a challenge for the Finance Minister. The budget tried to meet expectations from various sets of groups and brought a balanced growth approach with a focus on developing rural economy, infrastructure, healthcare and education. However, it did not deliver on key expectations such as reduction in Long-term Capital Gains (LTCG) rates, which disappointed the capital market. The abolition of the Dividend Distribution Tax (DDT) received a thump up. Companies pay DDT on the dividends distributed to the shareholders. According to market experts, this abolition will help the companies, which were earlier facing a DDT burden of 20.35 per cent. Apart from the corporates, DDT is also applicable on the mutual fund houses, as the dividends from mutual fund schemes are tax-free for the investors and MF houses deduct DDT at source. That means DDT paid by the scheme decreases the distributable surplus available to the investors. The debt funds scheme was earlier subjected to 25 per cent tax for individua