Dividends from MFs are tax-free for the investor

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: I studied the analysis given by you about the growth and dividend reinvestment options of mutual funds. My question is whether the dividend given by mutual fund is taxable income - i.e., does the investor has to pay tax on it.

—Kanti Patel

Dividends from mutual funds are tax-free for the investor. However, on dividends from non-equity funds there is a dividend distribution tax of 14.1625% applicable that is payable directly by the mutual fund.

Recently on a visit to India I purchased a house in Bangalore. Eventually I intend to use it to stay in if I return to India. But that's still years away. In the meanwhile, I intend to put it out on rent. What are the tax implications of rental income on NRIs like me?

—Ashok Kaul

Tax payable on rental income depends upon several factors like (i) Municipal ratable valuation and the place where the property is located such Delhi, Chennai, Mumbai, Kolkata, etc, (ii) Fair rent assessed on the basis of rents fetched by similar properties in the neighbourhood (iii) Standard rent applicable to those cities under the Rent Control Acts of respective states, (iv) Actual rent and (v) Unrealised and irrecoverable rent.

You can first deduct from the lease rental, municipal taxes paid and thereafter a standard deduction of 30% for repairs, insurance, etc.

The interest payable on housing loan is also deductible.

The resultant figure is to be added to your other income exigible to tax.

Computation of tax on house rent is a complicated matter. It is better to employ an accountant to file the tax returns if you have rental income.Incidentally, if your tenant is not an individual or an HUF, he is required to apply tax deduction at source before paying you the rent.

Recently, I read that investments in Post Office schemes and Senior Citizen Saving Scheme will be eligible for the Sec 80C benefit. What is the effective date of this amendment? In other words, from which date can I make the investments so that I can avail of the tax advantage?

—Noushad