TDS on Income from Units (Resident)
Introduction
Tax must be deducted at 10% under section 194K on income paid to a resident from units of mutual funds or specified companies, provided the income exceeds Rs. 10,000 in a financial year.
Key Provisions
- Deductor:Any person making payments related to:
o Units of a mutual fund under Section 10(23D).
o Units from the administrator of a specified undertaking.
o Units from a specified company.
- Deductee:Only applicable if the recipient is a resident; for non-residents, tax is deducted under Section 196A.
- Threshold:TDS applies only if income exceeds Rs. 10,000 in a financial year.
- Rate of TDS:
o 10%
o Higher rates apply if PAN is not provided (Section 206AA).
- Amount Subject to TDS:Only dividend income is considered; capital gains are not subject to TDS under this section.
- Time of Deduction:At the time of credit or payment, whichever is earlier, including when credited to a suspense account.
Exemptions from TDS
- Payments to the Government, RBI, Mutual Funds, or Tax-Exempt Corporations:No TDS by virtue of section 196.
Compliance Requirements
- Lower/Nil Deduction Certificate:Available under Section 197 (application to the Assessing Officer) or through a self-declaration under Section 197A.
- Deposit of TDS:
o Payable via Challan ITNS 281 within 7 days from the end of the deduction month.
o For March deductions, deposit by 30th April.
o Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statement Filing:Quarterly submission in Form 26Q.
- TDS Certificate:Form 16A must be issued within 15 days from the due date of TDS statement filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Liable for interest under Section 201.
o Penalty under Section 271C, up to the non-deducted amount.
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Liable for a penalty of Rs. 200 per day (limited to the TDS amount) under Section 234E.
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Liable for a penalty under Section 272A.