Dividend Yield Mutual Funds

What are the features of Dividend Yield Funds?

• Lower volatility as the portfolio invests in profitable companies

• Limited diversification in portfolio allocation

• Suitable for investors with a long-term investment horizon of 7+ years

• Invest through SIPs or lump sum

• Earn tax-free returns up to ₹1 lakh if you stay invested

Things to keep in mind when investing in Dividend Yield Funds

What should be the investment horizon for Dividend Yield Funds?

• Dividend yield funds look for dividend income to grow the portfolio’s value

• Since dividends are declared once or twice a year, short-term investment is not feasible

• There’s also a short-term volatility risk as the underlying securities might not yield sufficient dividends.

• A long-term investment horizon is recommended for growth and capital appreciation

• A long-term horizon also helps earn attractive investment returns

• You also get a tax benefit on staying invested for a longer tenure

What is the tax implication of Dividend Yield Funds?

• Returns up to ₹1 lakh are tax-free if you stay invested for 12 or more months

• Returns exceeding ₹1 lakh are taxed at 10%

• For redemption within 12 months, returns are taxed at 15%

• Dividends earned, if any, are taxed at your income tax slab rate

What are the payout options?

• Dividend option

  Earn dividends on your investment at regular intervals

• Growth option

  Accumulate the returns over the investment tenure and get a lump sum amount on redemption