Yeah, price on liquid bees remains at a constant 1000, all returns are in terms of dividends. So you will end up having more units at 1000 instead of same number of units at a higher price.
The good news is that dividends (either as cash or as new units/stocks) are tax free in the hands of the investors. So when you get new units as dividend for holding liquid bees, no taxes are applicable on that.
But from this financial year FY 16/17, dividends over and above Rs 10lks per year is taxable at the rate of 10%. But the first 10 lks are tax free.
While investor does not have to pay tax (for dividends below Rs. 10 lakhs), the MF company needs to pay dividend distribution tax (@ 28.84% including surcharge), isn’t it? thus net impact needs to be considered.
So if i am an investor who wants to park the money for say 3 years (beyond LTCG required holding period), am i better off using a regular debt fund (growth option) or liquidbees?
say liquidbees earn Rs. 100 in income, liquid fund (growth option) also earns same amount. Before distributing this earned income, liquidbees fund house will pay Rs. 28.84 in tax and balance Rs. 71.16 will be paid as dividend (units) which will be tax free for investor.
for liquid mutual fund (growth option), when investor withdraws, NAV will have gone up by Rs. 100. Investor pays Rs. 20.6% in LTCG on this and receives 79.4 in his hands. Thus if an investor is willing to hold for more than 36 months, he is better of being in a debt fund than in Liquidbees.
this is my understanding. can you comment on this.
The dividend from liquidbees is in the form of units of liquidbees, not cash. So suppose I have not redeemed those dividend units for cash, so do I still need to pay taxes in such a case. Or tax has to be paid only when I sell those dividend units? can anyone please clarify? Thanks
