Thread by @vaid_varun

It is hereby clarified that #MutualFund #dividends & Not Capital Gains will be subject to tax deduction at source (#TDS) from 1st April 2020. TDS of 10% if the dividend payout is more than Rs 5,000/- @fifaindiaorg @cafemutual @wealthforum_tv @ArthmitraG @livemint @bsindia

Chapter III, section 10 of the income tax act deals with “INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME”. This makes a distinction between ” income received in respect of the units of a Mutual Fund” and “income arising from the transfer of mutual fund units”

Income in respect of mutual fund units refers to dividend income. The quantum of such income is determined by the quantum of units held. Income from transfer of mutual fund units refers to redemptions and capital gains. #Budget2020

Insert a new section 194K to provide that any person responsible for paying to a resident any income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or units from the administrator of the specified undertaking or (cont.)

units from the specified company shall at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax there on at the rate of 10%. (cont..)

It may also be provided for threshold limit of Rs 5,000/- so that income below this amount does not suffer tax deduction.

Section Extract: (35) any income by way of — (a) income received in respect of the units of a Mutual Fund specified under clause (23D); or (b) income received in respect of units from the Administrator of the specified undertaking; or (cont..)

(c) income received in respect of units from the specified company:

Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be.

The law distinguishes income arising from the transfer of mutual fund units (capital gains) & income arising in respect of #mutualfund units (dividends). The finance bill has not amended or stated this by far.