In Mar 5th 2006, I had purchased 1000 units of a equity Mutual fund with dividend option at the rate of 30 Rs per unit. AMC declared 5 RS dividend per unit on Mar 30th. Now after a couple of month now NAV stands at 31 Rs. ( after dividend record date it came down to 27 and now risen back to 31).
If I sell now should I give short term capital gain on Rs 4 ( Rs 3 dividend received plus 1 Rs appreciation on purchase price) or should I give only on 1 Rs per unit.
You will have to pay short term capital gain on Rs 1 only. Dividend is tax free in your case.
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