Capital Gains from the sale of Mutual Funds

Are Capital Gains from the sale of Mutual Funds subject to TDS under Sec 194K ?

Hey @Jay_Tanna,

The Finance Minister has introduced a new Section 194K in Budget 2020. Sec 194K was applicable on or after 1st April 2020.

As per Income Tax Act, Sec 194K mentions TDS on ‘Income’ from Mutual Funds leading to a confusion if TDS was required to be deducted on Capital Gains on Sale of Mutual Funds also.

CBDT issued an official clarification on 4th Feb 2020. It clarified that TDS should be deducted at 10% on Dividend Income only and not on Capital Gains from the sale of mutual funds. Thus, Sec 194K is applicable as follows:

Sec 194K - AMC paying dividend on equity mutual funds should deduct TDS at 10% if the dividend exceeds INR 5,000.

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