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Dividend Distribution Tax
When a company or a mutual fund pays out a dividend, the Government steps in to collect a share of the proceeds. It collects a tax called the dividend distribution tax (DDT). The specifics may vary:
- Each type of investment (shares, equity mutual fund, debt mutual fund, etc) has a different rate of DDT. Currently the government is more lenient towards equity, while it taxes cash funds heavily
- Sometimes the government makes it a responsibility of the company or mutual fund to compute and pay this tax; and sometimes that of the investor. But in either case, remember that money is finally coming from your corpus, so the end result is the same!