If you buy mutual funds, Finance Bill 2011-12 has tax shocker for you!

Forget tax relief, money market fund , liquid fund and even all other kinds of mutual fund got a shocker as tax rate on income distributed by them has been increased by Budget 2011-12 . Dividend Distribution Tax for mutual fund industry is provided in section 115R of the I T Act which is now proposed to be modified as under

( the old rate is in blue where as new DDT tax rate is given in Red ).

New tax rate of DDT on

Money market mutual fund or a liquid fund

  1. 25 % on income distributed to any person being an individual or a HUF

  2. 30% (previously 25 % ) on income distributed to any other person.

By any other mutual fund, the new tax rate will be

  1. 12.5 % on income distributed to any person being an individual or a Hindu undivided family by a fund other than a money market mutual fund or a liquid fund;

  2. 30 % ( previously it was 25 0% ) on income distributed to any other person

How will this affect you ?

Naturally, the mutual fund industry will indirectly put you this burden somehow . As such , your investment instrument has just got costlier.