As per the existing tax laws, there is no specific exemption limit for dividends (IDCW) from mutual funds. The entire dividend received is added to the total taxable income of the investor and taxed as per the income tax slab applicable. However, TDS is deducted only if the dividend received exceeds the specified limit in a financial year.

Yes. Mutual fund dividends, now called as Income Distribution cum Capital Withdrawal (IDCW), are taxable in the hands of the investor. From 1st April 2020, when Dividend Distribution Tax (DDT) was abolished, IDCW payouts are added to the investor’s total taxable income and are taxed as per the applicable income tax slab.

Mutual fund dividends (IDCW) do not have a fixed tax rate for all investors. The dividend income is added to the total taxable income of the investor and taxed as per the relevant income tax slab. So the tax payable depends on the investor's tax rate. Furthermore, TDS may be deducted if the dividend received exceeds the specified limit in a financial year.

If dividend income on mutual funds is taxable under the provisions of the Income-tax Act, it cannot be completely avoided. IDCW is taxed as per the income tax slab of the investor; hence, investors are generally not eligible for any exemption. However, depending on an investor’s tax situation and financial goals, choosing the Growth option over the IDCW option may help defer taxation until the units are redeemed.