Ch.8 · Capital Gains Tax on Mutual Funds · medium
What was the 'Dividend Distribution Tax' (DDT) regime and when was it abolished?
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EXPLANATION
Under the DDT regime (pre-April 2020), AMCs paid Dividend Distribution Tax on dividends declared — this made dividends effectively tax-free in investors' hands since the company/fund had already paid tax. The Finance Act 2020 abolished DDT and introduced the current system where IDCW is added to investors' income and taxed at slab rates, making dividends taxable for investors in higher tax brackets.
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