Now Pay 10% Tax On Your Mutual Fund Income Of More Than Rs 5000: Extra Burden On Investors?

One of the shocking announcements made by Finance Minister Nirmala Sitharaman was the new 10% tax on all gains/income made via mutual funds, of more than Rs 5000 in value.

Will this turn out to be extra burden for the investors?

10% TDS On Mutual Fund Income

In the Union Budget 2020 announcement, Govt. has proposed to add a new clause in the Finance Bill 2020.

Section 194K in Clause 80 to tax MF returns can be soon added in the Finance Bill, which will force investors to shell out 10% TDS for income generated via mutual funds. 

Only if the income is more than Rs 5000.

This is what the clause states: “(i) units of a Mutual Fund specified under clause (23D) of section 10; or (ii) units from the Administrator of the specified undertaking; or (iii) 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 thereon at the rate of ten per cent,” 

This shall be TDS or Tax Deducted at Source, and the investor will have to pay the remaining tax while filing the returns.

Will This Prove To Be Extra Burden For Investors?

Once this new rule comes into force, then mutual funds will be treated like just any other investment avenue, like deposits at banks, and 10% income tax will have to be paid on the income which will be more than Rs 5000.

Earlier, TDS of 10% was only applicable in case any investor gets more than Rs 10 lakh as dividend from an Indian company, and in case of dividends from mutual funds, no tax was applicable.

However, there is still some confusion in this regard.

Some investment experts are not sure, if the 10% TDS will be extended to the capital gains category as well, in case mutual fund investment.

We will keep you updated, as more details come in. 

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