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Budget impact: Birla MF sees low dividend regime

Our Bureau

CALCUTTA, March 7

BIRLA Mutual Fund, in a communication to investors regarding the impact of Budget proposals on funds, has mentioned two possibilities: low dividend declaration and a relook at the type and plan of funds for investment decisions.

These scenarios are likely to result from the tax on dividend distribution by corporates (which has been increased from 10 per cent to 20 per cent), and surcharge on HNI assessees (raised from 10 per cent to 15 per cent). For HNIs or high net worth indiv iduals, the effective tax rate is now 34.5 per cent.

As for the attractiveness of debt-oriented funds, HNIs and corporates should still fund dividend plans worthy of their investment. Growth (or, appreciation) plans will be attractive for all categories of medium- to long-term investors.

The pure equity and balanced funds, on the other hand, are expected to be considered superior to debt-oriented funds on account of tax benefits and declining interest rates.

The withdrawal of benefits under sections 54EA and 54EB has been another highlight of the Budget. These benefits will not be available on sale of long-term capital assets after April 1. Investors, however, can still utilise these till September 30 on sal e of such assets on or before March 31. Meanwhile, the existing investments will continue to enjoy benefits under 54EA and 54EB.

Market circles pointed out that MFs have been actively declaring dividends in the recent past. The last few weeks have seen hefty dividends being offered by leading players such as SBI MF and Kothari Pioneer MF. Birla MF, too, has now joined the league. Birla Advantage Fund and Birla Equity Plan (earlier known as Birla Tax Plan) have offered investors dividends of 80 per cent and 25 per cent respectively. The record dates for these are March 22 and March 31, 2000.