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

Comments

4 Quick Tips to Stop Overspending..!!

The Tax Support Y ou may are during a situation where you've planned to save lots of money rather than overspending it. you'll have planned to shop for only what's necessary, stop eating out and control the urge to online shopping. Unfortunately, at the top of the month, you've ended up spending quite what you've thought you'd. Stopping overspending isn't as easy because it seems to be and if you actually want to save lots of money, read on to understand four quick and straightforward tips and tricks. Why shouldn't you overspend? In spite of the very fact that overspending may be a 'subjective' term, most folks tend to spend quite what we should always. Though it's going to not be easy to believe that you're overspending, the sooner you realize the very fact , the better it gets in controlling your urge to spend more. If you're one among those that purchase items because they're hooked in to those, ask yourself whether ...

Here's All You Need To Know About Indian Digital Tax

The Covid-19 outbreak has compelled businesses to transcend from traditional to digital models of work. With business models evolving on account of mass digitization, the complexities from a regulatory and taxation standpoint have only amplified. The advent and access to technology have enabled businesses to carry on business-as-usual with minimal physical presence. Unsurprisingly, India has the second-largest online users in the world, with over 560 million internet users, and hence, from the viewpoint of its tax revenue base, digital businesses could not be overlooked. However, as is the case in other jurisdictions, Indian tax laws were suited for conventional business models such as brick and mortar stores and thus in dire need of an overhaul. Recent Amendments To ensure that value created digitally is appropriately taxed; two significant amendments were introduced in Indian taxation laws in the recent past – The “Equalization Levy” – a tax aimed at foreign digital...

ITR Due Dates may extend till September 2020

The government is considering a proposal to extend the deadline for filing personal income tax returns to September 30 from July 31 because of the lockdown. The last date for paying advance tax has already been extended till June 30 from March 31. A senior finance ministry official said the CBDT was considering an extension of the last date to file personal income tax returns to September 30 from July 31. Besides the date for advance tax, the government has extended the deadline for employers to issue TDS certificates, or Form 16, to June 30. Tax practioners said it would be difficult for employees to file their income tax returns by July 31 — the normal deadline for most individuals to file ITRs — if they get their Form -16 (TDS certificates) as late as June 30. So, it is likely that the deadline of July 31 to file ITRs would also be extended. According to the income tax laws, the last date for filing TDS returns for an employer is May 31 and Form 16 has to b...

Vipin Sanger

Search This Blog