Why do debt funds attract a dividend distribution tax?

dividend distribution tax or ddt on mutual fund dividends

Level - BASIC

The dividend distribution tax payable by debt funds reduces returns to investors. Given this tax, watch this investor education video by Moneykraft to understand how investors should choose between the growth and dividend options of a debt fund.

AUTHOR(S): Uma Shashikant

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 The dividend distribution tax payable by debt funds reduces returns to investors. Given this tax, watch this video to understand how investors should choose between the growth and dividend options of a debt fund.

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    1.Hiren falls in the 20% tax paying bracket. He wants to invest in a monthly income plan. Which option should he choose to reduce his post tax return?



  • Dividend
  • Post tax return will remain unchanged
  • Growth
  • 2.Which of the following funds is "Not" subject to dividend distribution tax?



  • ABC Government Securities Fund
  • PQR Liquid Fund
  • XYZ Equity Fund
  • 3.DDT for a liquid fund is ___.



  • 0%
  • 0%
  • 0%
  • 4.A mutual fund posts _______ return in the dividend option as compared to return in the growth option after taking dividend distribution tax into account.



  • higher
  • Equal
  • lower
  • 5.Dividend distribution tax impacts post tax return of the investor ___________.



  • in the dividend option of a debt fund
  • in an equity oriented fund
  • in the growth option of a debt fund
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