I have invested around ₹4 lakh in some mutual funds, all regular plans with dividend options. They have deducted tax on the dividend amounts paid during this financial year 2020-2021. My question is whether the funds will issue Form 16A and whether the details of taxes deducted and remitted to the Government will be reflected in Form 26A of the Tax Department. Can I claim refund of the tax so deducted on filing my return of income?

J R Ravindranath Yes, the mutual fund company is required to issue Form 16A in respect of tax withheld on dividends. Further, the taxes deducted will be reflected in your Form 26AS. While you can offset the taxes deducted at source against your tax liability, you are required to offer the gross dividend income earned during the FY to tax under the head “Income from other sources”. Effective April 1, 2020, the dividend income is taxable in the hands of investors at the applicable slab rates. Further, tax would be deducted at 10 per cent as laid down in Section 194K of the Income-tax Act, 1961. The said rate of 10 per cent has been reduced to 7.5 per cent for all the dividend payments made from May 14, 2020 till March 31, 2021 due to Covid-19. Should your tax liability be lower than the TDS, refund can be claimed while filing your India tax return for the FY 2020-21.

The writer is Partner, Deloitte India

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