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How are the dividends on Liquid ETFs and Liquid BeES taxed?

Dividends on Liquid ETFs and Liquid BeES are taxed as per the income tax slab rate of the investor. When the units are sold, the amount on which tax is already paid is treated as the cost of acquisition and the gains are then taxed under income from capital gains.

Example scenario

1,000 units of Liquid BeES were purchased at ₹1,000 a unit. A dividend of 35 units was received and held for the financial year. The value of these dividend units will be taxed at the slab rate of the investor (35 units*₹1,000* slab rate).

When the dividend units are sold, the actual values of dividends received will be considered as the acquisition cost, i.e. 35 units*₹1,000 per unit, and the profit realised will be taxed based on the holding period.

The Short-Term Capital Gains (STCG) are taxed at 15% for holdings held for less than 3 years and the Long Term Capital Gains are taxed at 10% (0% for first ₹1,00,000) for holdings held for more than 3 years.

Did you know? If the dividends cross ₹5,000, an additional TDS of 10% is applicable.

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