According to the Finance Bill 2020, the Dividend Distribution Tax (DDT) paid by companies has been abolished and dividend income will now be taxable in the hands of investors. Section 194K tds has been reintroduced for deduction of tax on income from units of mutual funds.
Deductors: Any person responsible for paying dividends in respect of units of a mutual fund, units from the administrator of a specified undertaking, or units from a specified company.
Deductees: A resident.
Time of Deduction: At the time of credit or payment, whichever is earlier, if amount exceeds Rs. 5,000.
Rate of TDS: 10% on dividend income earned on mutual funds.
Notes: TDS should be deducted at 20% if the investor does not provide PAN. In the case of NRI investors, TDS should be deducted as per Section 195. Capital gain income is also exempted from the applicability of Section 194K.