Budget 2020-21 features a hidden shocker for open-end fund investors. Those enjoying returns from MFs will now find their pay-outs become lower because the Union Budget has introduced a deduction of tax on income from mutual funds if it’s in more than Rs 5,000.
Buried within the Finance Bill 2020 may be a proposal to insert Section 194K in Clause 80 to tax MF returns. “(i) units of a open-end fund specified under clause (23D) of section 10; or (ii) units from the Administrator of the required undertaking; or (iii) units from the required 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 thereon at the speed of ten per cent,” it said.
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Tax officials say the move was initiated to stay treatment of MFs at par with bank fixed deposit where tax is already deducted at source, and can also curb under-reporting, which was thus far done on a voluntary basis.
Experts, however, say the supply may be a dampener because it would go away less take advantage the hands of investors. TDS on income from mutual funds would be 10% as within the case of the other income sources, aside from salary.
If an investor falls within the higher income bracket , the rest tax would need to be paid by him while filing his returns after deducting tax set-offs.
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However, if the investor falls during a lower tax slab, then he can claim a refund while filing tax returns.
“Earlier, a private taxpayer was required to pay tax on the dividend at 10% only just in case “> just in case dividend received from Indian companies was quite Rs 10 lakh and no tax was payable in case of dividends received from mutual funds,” said Shalini Jain, tax partner, EY India.
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