Govt Increases Tax Rates on Dividends from Mutual Funds

In the budget for fiscal year 2025-26 (FY26), the government has decided that tax rates in case of mutual funds, contingent upon proportional income derived from average annual investments in debt securities and equities be charged to tax at the rate of 15 percent and 25 percent respectively. The increase in dividend tax rates on Mutual Funds aims to align the tax treatment of investment income with broader revenue goals and ensure a fair contribution. Differentiated rates help balance revenue needs while maintaining incentives for various types of investments. The total revenue of this impact is estimated to be around Rs. 14,000 million.