anybody knows a product reflecting nifty-50 that gives out yearly dividends? my favorite so far was niftybees ETF… but they dont give out dividends… they say they are reinvesting those dividends… which makes a mockery of my investing plans. thanks.
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Since nifty bees benchmarked against nifty TRI, no dividends are declared. The divdends from the index constituents are reinvested which is reflected in the NAV/price.
You can invest in index mutual funds if u want dividends. I know UTI Nifty Fund has dividend option.
I have thought about this recently and concluded that it is much better to just redeem the NiftyBees units directly instead of the AMC paying out a dividend.
If the AMC does pay a dividend, they will first have to cut 10% TDS (if the dividend amount crosses Rs5000. Currently, TDS has been reduced to 7.5% till 31st March 2021 due to the pandemic). Secondly, as per the new budget, the dividend income will be taxed as per the slab rates.
It would be much more tax-efficient to redeem the NiftyBees units directly on a regular basis. Even if those units are redeemed within one year of purchase, they will carry a flat tax rate of 15%. If they are redeemed after one year, then the tax rate will be flat 10% in excess of INR 1,00,000.
Given that the Dividend Yield of Nifty50 is currently at 1.48, it would mean redeeming around 15 units per 1000 units bought. As brokerage charges for selling ETFs is similar to equity (Need help regarding ETF), the redemption overhead wouldn’t be much. That being said, if there could be some sort of automation introduced for this whole procedure, it would be great.
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