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Practice Test (AMFI)
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Dividends distributed by mutual funds are
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A
Tax-free in the hands of the investor
💡 Explanation:
Dividends from mutual funds are tax-free in the hands of investors in India (under Section 10(35) of the Income Tax Act). The mutual fund pays a dividend distribution tax before distributing, so investors receive the amount tax-free. This policy encourages investment in mutual funds.