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TDS only on dividend by MF, clarifies I-T dept

Our Bureau New Delhi | Updated on February 04, 2020

‘No tax will be levied on income from mutual fund’

The Income Tax Department on Tuesday clarified that tax deducted at source (TDS) will be levied only on dividend and not on the income from mutual fund.

The Budget has removed DDT (dividend distribution tax) at the level of company/ mutual fund and proposed to tax the same at the hands of share/unit holders and introduced a new system of TDS.

“A mutual fund shall be required to deduct TDS at the rate of 10 per cent 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,” the department said while adding that necessary clarification, if required, shall be proposed in the relevant provision of the law.

The Budget proposed to levy TDS at the rate of 10 per cent on the dividend/ income paid by the company/ mutual fund to its share/ unit holder if the amount of such dividend/ income exceeds ₹5,000 in a financial year.

Queries have been received to the effect that whether under the proposed section, the mutual fund would be required to deduct TDS also on the capital gains arising on redemption of units or only on the dividend. The department hoped that there will not be any confusion following this clarification.

Published on February 04, 2020

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