Multiple choice

As per current regulations, dividend distribution tax should be taken into account when computing net returns from

  1. equity funds

  2. debt funds

  3. both the above

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dividend Distribution Tax (DDT) applies to debt funds in India, meaning dividends distributed from debt funds are subject to tax at the fund level before reaching investors. Equity funds were exempt from DDT (though this has changed over time with different tax regimes). When computing net returns from debt funds, investors must account for the DDT impact because it reduces the actual dividend received. This question tests knowledge of Indian mutual fund taxation.

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