InvestorQ : Can dividend yield funds save tax?
Moii Chavate made post

Can dividend yield funds save tax?

Sam Eswaran answered.
7 months ago

Dividend yield funds invest in stocks and follow a strategy of investing in stocks that generate higher dividend yield. The advantage dividend yield funds have is that dividends that mutual funds receive on their equity portfolio from the investee companies are not taxed. This is especially important after the latest budget proposal to tax dividends at the hands of investors.

The dividends that mutual funds receive in their portfolios are different from the ones they give their unitholders. Mutual funds invest in shares of companies on behalf of the investor, who gets units representing the share portfolio.

Dividends given by companies get added as units for holders. If an investor opts for the growth option of these funds, the dividend paid by companies in the portfolio will be added to the net asset value (NAV) of the scheme which will go up subsequently.