"Dividends And Income From Mutual Funds"- Income from 'Other Sources'

 

Income from dividends and income from mutual funds is fully exempted from income tax.


A dividend received by a shareholder is deemed to be his income for the previous year in which it is declared, distributed or paid. An interim dividend paid by a company shall be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.

As per Section 14A of the Income Tax Act, 1961, any expendi ture incurred in relation to income not includible in total income is not allowed as a deduction.. Thus, with effect from AY 2004-05 any expenditure incurred on earning dividend and units income would not be deductible, for example, the interest you pay on loan taken for the purpose of buying the shares or units in question. Always avoid taking loan and then investing in the stock market in shares and units of equity-oriented mutual funds.
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