Have you ever invested in a business trust or investment fund? If so, you might encounter Section 194NF of the Income Tax Act, 1961.
Section 194NF is a crucial provision that deals with tax deducted at source (TDS) on the distribution of income by Mutual Fund Units to individuals or Hindu Undivided Families (HUFs). In simpler terms, it applies to any income distribution made by mutual funds to their investors.
Here’s what you need to know:
What it is?
This section deals with the taxation of income distributed by a business trust or investment fund to its unit holders.
What is its Applicability?
It requires the person responsible for making the payment (usually the trustee, manager, or authorized person) to deduct tax at a rate of 10% on the income distributed to the unit holder.
Why is it significant?
This ensures the income is taxed before reaching the investor, streamlining tax collection and compliance.
What are the exemptions?
Certain exemptions and deductions may apply based on the type of mutual fund scheme, the investor’s status, and other relevant factors. It’s essential to consult with a tax expert or refer to the Income Tax Act for specific details.
In addition, This is not the only section related to taxes for business trusts and investment funds, so it’s always recommended to consult a tax professional for personalized advice.
