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The Central Board of Direct Taxes has clarified that redemption or repurchase of mutual fund units would not attract taxes (under distributed income), as such income is not in the nature of income distributed to unit-holders.
The CBDT also said bonus units at the time of issue would not be subjected to additional income tax since an issue of bonus units was not akin to dividend distribution. It added that the Income Tax Act prescribed that the cost of acquisition of bonus units should be treated as ‘nil’ for the purposes of computation of capital gains tax.
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