Mutual Fund - TDS on Dividend only, Not on Capital Gain

There are many queries raised to Central Board of Direct Taxes (CBDT) regarding the Tax Deduction at Source (TDS) on Dividend and Capital Gain arriving out of redemption of mutual fund units. 

On 4th Feb, CBDT Clarifies that there will be no need to deduct the TDS on sale of Mutual Fund Units, I.e. on Capital Gain by the Mutual Fund companies, rather it is required to deduct 10% TDS only on the dividend payment by the Companies and Mutual Fund companies.

Hence Mutual Fund companies will not deduct any TDS when you redeem your units, they only deduct 10% TDS when they will distribute the Dividend or Income.

Suggestions :

You have two options when you are investing in mutual funds, Growth and Dividend. This mean, when you received dividend on mutual fund, Mutual Fund Companies will invest the same amount in your folio and they credit the extra units as per NAV in the case of GROWTH. Secondly, they will paid the amount to unit holders as Dividend Income. 

Here you should choose Growth option when you are going to invest in Mutual Funds, it will eliminate deduction of TDS as same will get allotted to your units and it's mutual fund company who deals with the tax on dividend. 

As an Investor you will need not to deal with any TDS, you just need to take care of your Capital Gain when you redeem your units.

If you have any question, you can ask me in the comment box and till then Happy Learning !!!