Debt funds hit by DDT spray
Cash rich companies that make a quick buck by parking their surplus funds with fixed income mutual funds (MFs) will see more pain for their gains.
Institutions, including corporates,have to shell out more taxes for their profits as the dividend distribution tax (DDT) on money market funds has been increased to 30%. While the DDT for liquid funds has been increased from 25% to 30%, it has gone up from 20% to 30% for liquid plus funds. However, the DDT remains unchanged for retail investors at 12.5%.
The government is pushing the industry to get more investments from retail investors for the fixed income category, a top official with a leading fund house said. Institutions account for bulk of the funds mobilized by MFs through fixed income schemes.
“There would be some pressure on funds with duration of 1-6 months,” said Ritesh Jain, head, fixed income, Canara Robeco MF. With the hike in DDT, returns from fixed income MFs would almost be on a par with bank fixed deposits, said industry officials
ALEEM AHMAD
PGDM 2 nd SEM.
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