MF biz may take a `740 crore tax hit

Mumbai, June 18: Over 46 million equity-linked retail investors in mutual fund industry may be in for a jolt if the government goes ahead with its plans to tax dividends at a hefty 10 per cent from next fiscal year.

This move is likely to see an outgo of around `740 crore per annum from these investors, say experts. However, industry lobby Amfi expects the government to heed its demand to shelve the plan and has already represented the matter to the finance ministry.

The fear comes after the tax department recently notified the amended section115BBDA of Income-Tax Act 2017, which seeks to tax dividend from MF investments into equities at 10 per cent if the total income of an assessee exceeds `10 lakh, including dividends distributed or paid by companies.

The equity linked MF industry is around `7 trillion and companies on an average `1.4 per cent annually, which totals `7,400 crore, which will be taxed at 10 per cent. If the plan goes get through then it will lead to an additional tax burder of around `740 crore from next April, say experts.

Currently, investment is not taxable as MFs enjoy exemption under section 1023D of the I-T Act.