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

Which statement about tax deduction at source (TDS) on mutual fund income paid to a resident investor is correct?

A mutual fund deducts TDS on IDCW paid to a resident investor once the amount crosses the prescribed annual threshold. Capital gains of resident investors are not subject to TDS by the fund, whereas non-resident investors' gains are subject to TDS.

  1. ANo TDS applies to any capital gains of a resident investor
  2. BTDS applies on IDCW payable to a resident if the amount exceeds the prescribed threshold in a yearCorrect
  3. CTDS on resident capital gains is deducted at 30%
  4. DTDS is deducted on switch between schemes only

Explanation

Mutual funds deduct TDS on IDCW paid to residents when it exceeds the specified annual threshold. Capital gains of resident investors do not attract TDS by the fund. TDS on gains applies to non-resident investors.

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