Tag: mf dividend tax

Tax Query: How to get TDS certificate from mutual funds?

Personal Finance

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I have a few doubts with respect to my ITR for FY 2020-21 i.e. current AY 2021-22. I have invested ₹20,000 in Templeton India Equity Income Fund in 2006 under NFO. Since then periodical dividends declared under the scheme are getting credited to my savings a/c through ECS regularly and are accounted for in my ITR returns of the respective financial years. Since the Finance Act 2020 is modified and the dividends are now taxable in the hands of investors, the mutual fund has deducted TDS and paid the balance of the dividend to my savings account. Since I have not received Form 16 A for the TDS made by the mutual fund, I have sent a mail to the RTA of the MF. Initially, they have asked for a self-attested copy of my PAN card which I have provided to them. Now the RTA has replied that my PAN was not registered in FY2020-21 with them and was registered subsequently and hence, they are unable to fetch the TDS certificate for the FY2020-21. Since, the TDS was deducted on the dividend amount paid to me, kindly inform me how I can obtain TDS certificate and show them in my returns.

I also request you to kindly inform me how to show them in the current ITR in the absence of Form 16A.

Further, I am a retired pensioner and an amount of ₹15 lakh is invested in PMVVY Scheme and am receiving quarterly amount. Please clarify under what head should the amount be shown. Apart from my pension, during the year I have incomes including interest on bank deposits, dividend income from shares and MFs, interest income from NCDs, sovereign gold bonds, savings bank A/c, infra bonds, interest on NHAI tax-free bonds and short term & long-term capital gains. I have one self-occupied house property. My total income during the year is less than ₹50 lakh and I do not have any agriculture income. In the light of the above, I request you to kindly inform me which ITR return I have to file?

Rama Krishna

Dividend shall be taxable under the head ‘Income From Other Sources’ (IFOS) as per the Act. If your PAN is available with brokerage company/fund manager, the taxes deducted would be reported in your Form 26AS based on which the TDS credit can be claimed in the tax return. Where the company has not deposited the TDS/filed the TDS return, due to absence of your PAN details, you are required to complete the KYC formalities and provide the scanned copy of PAN to enable them to do the needful.

Pension income earned from Prime Minister Vaya Vandana Yojana Scheme (PMVVY) of LIC of India is fully taxable and shall be reported under the head IFOS. Please be informed that bank interest, dividend income from shares/mutual funds, interest income from infrastructure bonds, NCDs and sovereign gold bonds shall be taxable under the head IFOS. Short term capital gain/long term capital gain on sale of shares needs to be reported under the head capital gains.

Considering your income pattern, you are required to file ITR 2 for the FY 2020-21.

In the issue dated September 5, 2021, you have mentioned that if money is gifted to relatives, any interest earned out of that will be taxed in the hands of the recipient only. In a similar manner If shares allotted in an IPO are gifted to spouse, and if they are sold within a period of one year, will the short term capital gain be taxed in the hands of the recipient of the gift? If yes, what sort of record should be kept?

Niranjan

Your spouse is not required to pay any tax on receiving shares from you as a gift. However, Section 64(1)(iv) of the Act provides for clubbing of income in the hands of the transferor when assets are transferred for inadequate consideration. Providing gifts to your spouse would amount to transfer for inadequate consideration. Accordingly, any gains arising from sale of such shares is taxable in your hands. Besides documentation evidencing cost of acquisition of shares, sale consideration, selling expenses, etc., and documentation related to gift (like gift deed) needs to be kept on record.

The writer is Partner, Deloitte India

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Tax Query: Does a mother pay tax on money received from NRI son?

Personal Finance

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My son is working in the Netherlands and sends me €300 every month. My son pays income tax on his salary there. I used to send him €2,400 from India every month during his higher education in the Netherlands for almost two years. Is the money I receive from my son every month taxable in India? My existing income falls under 20 per cent tax bracket.

Manjula

As per provisions of section 56 (2)(x) of the Income-tax Act, 1961 (‘the Act’), income tax is payable on any sum of money (if aggregate value exceeds ₹50,000) received by an individual without consideration. However, any receipts from specified relatives (includes lineal ascendant or descendant of the individual), would not be considered as taxable. Hence, a gift of money from your son (who is your lineal descendant) will not be subject to tax in your hands in India.

I got only one folio with Sundaram MF i.e. Diversified Equity Fund. The fund had declared a dividend of ₹725 and deducted tax at the rate of 20.8 per cent. On taking up the matter with them they stated that timings and frequency and amount of dividend declared is not known in advance. They also said that the investment horizon of the investor is unknown and actual dividend income accrued for such TDS cannot be assessed. The fund-house also said the threshold limit of ₹5,000 has been aggregated at PAN level across all AMCs and Sundaram MF does not have investor level data of dividends being declared for each PAN during a year. So, they will deduct TDS from each dividend declared even without reaching the ₹5,000 threshold. In case of total TDS exceeding the actual tax liability of any investor, he/she can claim refund while filing income tax returns. I feel the explanation given by Sundaram is patently absurd. If all MFs take this stand, and deduct tax irrespective of the amount of dividend, what is the sanctity of the threshold limit of ₹5,000. In my view, they should aggregate the dividend under their schemes alone and deduct tax if it exceeds ₹5,000 and not otherwise. Please give your considered opinion on this subject.

Cyril Dsouza

As per provisions of section 194K of the Income-tax Act, 1961 (‘the Act’), payers (MF house in this case) are required to deduct tax at source (TDS) at 10 per cent for payments made to resident individuals. However, if the amount of such income paid during financial year (FY) to the payee does not exceed ₹5000, tax is not required to be deducted at source. Literal reading of the section suggests that no TDS is to be deducted by the payer if amount paid by them during a FY does not exceed ₹5,000. However, practically some payers take a view that the threshold limit of ₹5,000 is to be considered qua the individual (i.e. at PAN level) and necessary TDS to be done. In such a scenario, individual would have to claim credit of such TDS in the return of income. Also it is important to note that, as per provisions of section 206AA of the Act, in case you do not provide your PAN to the payor, then tax is required to be deducted at a rate of 20.8 per cent (including applicable cess). If this holds true for your case, this may be reason for the MF house to deduct tax at the rate of 20.8 per cent.

The writer is a practising chartered accountant

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