Mutual funds see limited impact from higher tax
Mutual funds expect the increase in dividend distribution tax for money market funds to curtail some inflows, but see it as a small raise that can't diminish their appeal.
By PTI |
MUMBAI: Mutual funds expect the increase in dividend distribution tax for money market funds to curtail some inflows, but see it as a small raise that can't diminish their appeal.
"The hike in the dividend distribution tax is the biggest negative in the budget, but it is still better compared to competing products," said Sanjay Prakash, chief executive officer at HSBC Asset Management (India) Pvt Ltd.
Finance Minister Palaniappan Chidambaram said in his budget for fiscal 2007-2008 that he was raising the dividend distribution tax on money market and liquid mutual funds to 25 per cent for all investors.
Currently, such funds attract a tax of 20 per cent for corporates and 12.5 per cent for individuals. Most investors in such funds are companies or treasury organsations with a need to park money for a short term.
The competing products are fixed deposits and shorter maturity products from the banking sector that are taxed at the rate of 30 per cent.
ADVERTISEMENT
However, "the dividend tax is still lower than the corporate tax," said N Sethuram Iyer, chief investment officer at SBI Funds Management Pvt Ltd. "I don't see a major impact."Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
