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
- 25 % on income distributed to any person being an individual or a HUF
- 30% (previously 25 % ) on income distributed to any other person.
By any other mutual fund, the new tax rate will be
- 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;
- 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.