TDS ON DIVIDEND FROM MUTUAL FUNDS

• What is Mutual Fund?

A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.


• Incomes from Mutual Funds?

Investors typically earn a return from a mutual fund in two ways:



• Insertion of New Section Under TDS For Taxability of Dividends from Mutual Funds.



The Finance Bill, 2020 proposed to remove Dividend Distribution Tax (DDT) at the level of Company/Mutual Fund and proposed to tax the same in the hands of share/unit holder. It was also proposed to levy TDS at the rate of 10% on the dividend/ income paid by the Company/Mutual Fund to its share/unit holder if the amount of such dividend/ income exceeds five thousand rupees in a financial year.

• Whether TDS Need to Be Deducted on Capital Gain Also?

Queries have been received to the effect that whether under the proposed section 194K, the Mutual Fund would be required to deduct TDS also on the capital gains arising on redemption of units. It is hereby clarified that under the proposed section, a Mutual Fund shall be required to deduct [email protected]% only on dividend payment and no tax shall be required to be deducted by the Mutual Fund on income which is in the nature of capital gains.

• Summary:

If the amount of dividend income from Mutual Fund exceeds Rs 5,000/- in a Financial Year:


If the amount of dividend income does not exceed Rs 5,000/- in a Financial Year:


If the income is in the nature of Capital Gain:


Disclaimer:“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”

Prepared By

A. Satish Kumar Sarab

Date: 19/03/2020