Skip to main content

TDS cut to benefit investors in equity mutual fund dividend plans

Investors in dividend plans of equity mutual funds will benefit from the 25% cut in the rates for tax deducted at source (TDS) announced by finance minister Nirmala Sitharaman on 13th May 2020.

Tax experts said mutual funds are currently required to deduct a 10% TDS on dividends paid to unit holders. For the remainder of FY 2021 this will come down to 7.5%. The lower rates will come into effect from May 14 and include deductions on dividend, interest, professional fees and brokerage.

Investors who route money through alternative investment funds (AIFs), real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), too would get the benefit of the lower TDS rate, say experts. REITs and InvITs are taxed in the same manner as debt instruments.

The government had made dividends taxable in the hands of investors in the budget for FY 2021.

“The unit holders will get the benefit of reduction of TDS on the dividend declared by mutual funds. This benefit will be enjoyed by all class of resident investors.”

A section of debt market investors will see higher returns as interest income has also been covered under the proposal. Any individual investor or trusts earning interest on corporate bonds and non-convertible debentures (NCDs) are currently subject to TDS at 20%. For the rest of FY21, they can pay 15%.

However, the benefit will be applicable only on direct investments in debt instruments and not through a mutual fund. This is because debt MFs don’t cut any TDS on distributed income.

“The decision temporarily helps, as for time being, it will leave more cash in the hands of resident investors which may be deployed to generate additional returns until the taxes are finally discharged.”


To be sure, the benefit of lower TDS can be availed of only by residents, implying that foreign portfolio investors (FPIs) and non-resident Indians (NRIs) will not be eligible for this benefit.

Know about us - https://thetaxsupport.com
You can find more articles on at https://thetaxsupport.com/blog
You can find tutorial videos on at https://www.youtube.com/c/vipinsanger
Labels:
Location: New Delhi, Delhi, India

Comments

Post a Comment

Popular posts from this blog

Why Investing Is Important

Why Investing Is Important.. Investing has become increasingly important over the years, because the way forward for Social Security benefits becomes unknown. People want to insure their futures, and that they know that if they're counting on Social Security benefits, and in some cases retirement plans, that they'll be certain a rude awakening once they not have the power to earn a gentle income. Investing is that the answer to the unknowns of the longer term . You may are saving money during a low interest bank account over the years. Now, you would like to ascertain that cash grow at a faster pace. Perhaps you've inherited money or realized another sort of windfall, and you would like how to form that cash grow. Again, investing is that the answer. Investing is additionally how of achieving the items that you simply want, like a replacement home, a university education for your children, or expensive 'toys.' in fact , your financial goals will determine...
Post a Comment
Read more

Small Businesses should use mobile apps for filing GST - 9 reasons Why..

GST and Taxation for MSMEs: GST accounting applications have helped in the transition of many small businesses and entrepreneurs in an easier and cost-effective manner to a new indirect tax system and also making them organised in terms of their bookkeeping. GST and Taxation for MSMEs: Since the launch of July 2017, Goods & Service Tax (GST) has been the most important factor for government and businesses with many changes being introduced recently. GST for Indian economy has been an evolving process and has brought advantages for small businesses in many ways by reducing complexities of inter-state taxation, digitization of MSMEs and an online portal for registration, filing and compliance purpose to make indirect taxation convenient and simple in India. There are about 13 million GST payers, out of which, 6-7 million are B2B, and 5-6 million are B2C. India’s MSME sector contributes about 8 per cent of India’s GDP, 45 per cent of the manufacturing output, 40 per cent of the ...
Post a Comment
Read more

Critical Analysis of the Companies (Amendment) Bill, 2020

Amendment to the Companies Act, 2013 (‘the Act’) seems to be a routine activity of the Indian Government. The Act was amended by the Companies Amendment Act, 2015, 2017, 2019 and now, in 2020 (as proposed). Every time, the object of the amendment is different – from the ease of doing business to ease of living for corporates.  With the Government’s objective of facilitating greater ease of living to law-abiding corporate, it had constituted Company Law Committee (‘Committee’) on September 18, 2019. The overall objective of the Government and the Committee was to decriminalize some more provisions of the Act based on their gravity and to take other necessary measures to provide further ease of living for corporates and companies in the country. The Committee submitted its report in November 2019.  Based on the recommendations of the Committee and an internal review by the Government, the Companies Amendment Bill, 2020 proposed amendment to various provisions of the Ac...
Post a Comment
Read more