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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

A resident investor in a mutual fund receives IDCW of Rs 40,000 during the year from a domestic equity scheme. Under current TDS rules, what is the position on tax deduction at source by the mutual fund?

The mutual fund deducts TDS at 10% on IDCW paid to a resident when the annual amount exceeds the prescribed threshold. Rs 40,000 exceeds that threshold, so TDS applies; it is not 30% and not exempt for residents.

  1. ATDS at 10% is deducted when IDCW to a resident exceeds the prescribed annual thresholdCorrect
  2. BNo TDS is ever deducted for residents
  3. CTDS at 30% is deducted on all IDCW
  4. DTDS is deducted only on capital gains, never on IDCW

Explanation

Mutual funds deduct TDS at 10% on IDCW paid to resident investors if the amount exceeds the prescribed threshold in a financial year. Rs 40,000 is above the threshold, so TDS applies. The 30% and no-TDS options misstate the rule.

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