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How Monthly Income Plans Are Taxed
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Three important things to know about tax on investments in monthly income plans (MIPs), offered by mutual funds. Website: www.fundoomoney.comFundooMoney Upload ScheduleNRI Q&A: every ThursdayMutual Fund Q&A: every FridayOther Uploads: Saturday & WednesdayMarkets Next Week: SundayEdited Highlights
1:04 How are Monthly Income Plans (MIPs) from mutual funds taxed?
1:10 MIPs try to provide regular income
2:30 Typically, 75-80% of the money in a monthly income plan (MIP) is invested in debt investments or debt securities
2:43 For tax purposes, MIP is treated like a debt fund
2:49 About 20% is invested in equities which provides the growth
3:01 If you remain invested for less than 3 years, the capital gains gets added to your income and you get taxed according to your tax slab
3:13 If you remain invested for more than 3 years, you get the benefit of inflation indexation
3:21 This means that cost of buying the units gets enhanced for tax calculation purposes
3:33 As a result, you pay lesser amount of tax and the rate of tax is also lower at 20% for long term capital gains tax
3:40 More than three years, your gain is considered as long term capital gains and short term capital gains for less than 3 years
3:54 In MIPs, you look forward to regular dividends for the regular income
3:59 The fund house has to pay the Dividend Distribution Tax or DDT on the dividend
4:12 The dividend is tax free in your hands
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