Government has introduced a new section 194K in budget 2020 which states that:
Any person responsible for paying to a resident any income in respect of units of mutual fund or units from the administrator of the specified undertaking or units from the specified company, shall at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax at the rate of 10%. This section will be applicable if the amount of payment is Rs. 5,000 or more.
Insertion of new section has created a dilemma for the taxpayers that whether under the proposed section 194K shall also be deductible on the capital gains arising on redemption of units?
CBDT issued press release on February 4, 2020 and clarified that under the proposed section, the TDS shall be deductible @ 10% only on dividend payment and no tax shall be required to be deducted on income which is in the nature of capital gains.
