CBDT clarifies – 10% TDS applicable only on dividend payment by mutual funds

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CBDT has issued a clarification that the requirement of deducting TDS @ 10% will ONLY apply for dividend payments by mutual funds. No tax shall be required to be deducted by the mutual fund on income which is in the nature of capital gains.

There was lot of confusion on the budget announcement day if the TDS is applicable on both dividend and Capital Gains.

The Finance Bill, 2020, has proposed the insertion of a new section — 194K — in the Income Tax Act, which states “any person responsible for paying income arising from units of mutual fund or a specified company must deduct tax at the rate of ten percent of such income”. Experts were of the opinion that the term “Income” is very broad and open to interpretation.

But CBDT has now clarified that TDS is only applicable for dividend income.

Read the new tax slabs announced in the Budget and conditions

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