A Comprehensive Guide On Forthcoming Mutual Fund Dividends

Mutual funds

A dividend option in mutual funds offers regular earnings to investors. The distribution of dividends depends on the accumulated surplus of a mutual fund scheme. For instance, let’s say Mr. Singh owns 1,200 units of an equity-based mutual fund. It announces Rs. 4 per unit dividend. Thus, his dividend income turns out to be Rs. 4,800.

Do you want to know about the forthcoming dividends? Keep scrolling!    

Some of the Upcoming Mutual Fund Dividends

All kinds of mutual fund schemes declare dividends at regular intervals. If you invest in these schemes, you must track the latest dividend announcements on a daily basis. Go through the chart below to know about some of the forthcoming dividends:

Importance of Checking Forthcoming Dividends

Every mutual fund scheme announces its dividends periodically. You must keep checking the summary of the recent mutual fund dividends to avoid missing a payout. Another reason to track the dividend announcements is that you may end up purchasing mutual fund units after the scheme has gone ex-dividend.  

You should also keep in mind the record date before buying mutual fund units. After the expiry of the record date, you’ll not receive your dividend income.  

Frequency of Mutual Fund Dividend Declaration

The frequency of dividend announcements depends on the kind of mutual fund scheme you have chosen. If you have invested in a debt mutual fund scheme with a monthly dividend option, then your dividends will be more certain. That said, if you want to make a long-term investment, then the growth option is the right option for you. 

Most schemes provide both options ─ you need to decide which one to skip and which to choose. Don’t forget to compare the tax implications for both cases. Debt mutual funds, hybrid mutual funds and equity mutual funds offer regular dividends and you need to understand each of these schemes before investing. 

Also Read: International Mutual Funds

Calculation of Returns from Forthcoming Dividends 

It is somewhat difficult to estimate the returns from dividend options of mutual funds. However, you need to compute the same to find out whether interests from bank deposits are better than mutual fund dividends. Let’s simplify this fact with an example!

Let’s say, Mr. Sharma has invested in an equity mutual fund scheme with an annual dividend option. He calculates whether his dividend income after a year will be more than his yields from bank deposits. Furthermore, he computes the tax implications for both cases. To his surprise, he finds out that the mutual fund dividend is more tax-efficient than his bank deposits. 

You must study and compare the latest mutual fund dividends to avoid investing in schemes that haven’t yielded favourable returns over quite some time.     

Options for Receiving Mutual Fund Dividends

While it is imperative to go through the forthcoming dividends, you will also need to select the type of dividend that you wish to have. There are three options in relation to dividend payout — monthly, quarterly and yearly. Make sure to choose an option as per your requirements. Individuals who want a regular flow of income can opt for the monthly dividend option.     

Taxation of Mutual Fund Dividends 

Till the fiscal year 2019-20, fund houses and asset management companies (AMCs) used to pay DDT (Dividend Distribution Tax) before giving away the dividend. However, this dividend income was tax-free for investors. The Finance Act, 2020 has made mutual fund dividends taxable for shareholders. It has also eliminated the DDT concept. 

Additionally, fund houses will deduct 10% TDS on dividend income per investor if the earnings exceed Rs. 5,000. In case the dividend amount (paid in any mode except cash) of a resident investor is less than or equal to Rs. 5,000, then TDS will not be applicable.    

Also Read: Difference Between Load And No Load Mutual Funds   

Final Word

Despite tax implications, mutual fund dividends offer a regular source of income. If you have a keen interest in mutual funds, you must keep tracking the forthcoming dividends to invest wisely. 

Frequently Asked Questions 

Who can select a mutual fund dividend option?

Dividend options of mutual funds are suitable for risk-averse individuals who wish to have a regular flow of income. These payments can meet the liquidity requirements of retired individuals. However, an investor with a goal of wealth creation can choose the growth option.  

Who sets a record date?

When a company announces dividend distribution, it specifies a record date. On this date, you should be on the company’s books as an investor to receive the dividend. A company also records this date to find out who has received financial reports, bonus shares and other information.  

What is an ex-dividend date?

After deciding the record date, a company sets the ex-dividend date depending on stock exchange rules. This date for stocks is mostly set one working day prior to the record date. If you buy a stock on or after this date, you won’t get the next dividend. Instead, the seller will receive your dividend.

When does a fund house distribute dividends?

When a company in a mutual fund scheme’s portfolio pays dividends, it gets reflected in the Net Asset Value (NAV) of the fund. However, an AMC may not pay you the dividend after receiving it from the company. It distributes the dividend as per its own terms and conditions. 

Even after not receiving any dividend, a fund house may distribute dividend income among its investors if it has fetched some profits.

Do mutual funds offer tax benefits?

Yes, an Equity Linked Savings Scheme (ELSS) acts as a tax-saving mutual fund. As per Section 80C of the Income Tax Act, 1961, you can claim a tax deduction of Rs. 1.5 lakh (maximum) every financial year by investing in ELSS.

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.