Skip to content

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

Under the Income-tax Act as covered in the NISM-Series-V-A syllabus, what is the position on TDS for a resident investor's mutual fund redemption proceeds?

No TDS is deducted on capital gains of resident investors in mutual funds; they compute and pay the tax themselves. TDS on capital gains applies to non-resident investors. Options citing resident TDS rates on redemptions describe rules that do not exist.

  1. ATDS at 10% is deducted on all capital gains of residents
  2. BNo TDS is deducted on capital gains of resident investors, who pay tax themselvesCorrect
  3. CTDS at 30% on all redemptions above Rs 50,000
  4. DTDS equal to the investor's slab rate on the whole redemption amount

Explanation

Mutual funds do not deduct tax at source on capital gains of resident investors; the investor computes and pays the tax, for example via advance tax or return. TDS on capital gains is applicable to NRIs. The other options invent resident-investor TDS rules.

Did you get it right without looking?

One question tells you little. A timed set on Taxation shows your real accuracy, how long you take and where you lose marks.

Practise TaxationFree diagnostic mock

More Taxation questions