sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
Direct Tax »
 Three reasons to file income tax returns on time
  New direct tax code may have to wait until 2019
 Direct tax collection grows fastest in 7 years in FY18, courtesy GST; here’s how indirect tax reform helps
 Income Tax: Deadline for filing belated ITR of Assessment Year 17-18 is over
 Income Tax department cautions TDS deductors, says file statements by May 31 or pay penalty
 ITR-4 launched on e-filing portal; total 3 ITRs available now
 CBDT directs income tax department to hold grievance redressal fortnight for taxpayers in June
 Income tax return form-2 in Java format released for e-filing for FY2017-18
 3 ITRs available now ITR-4 launched on e-filing portal
 Businesses, small taxpayers to gain from new direct tax code
 New direct tax code to benefit corporates, income tax payers

No tax on redemptions and bonus units, CBDT clarifies
February, 17th 2014

Tax authorities were demanding AMCs to pay tax on redemptions and on issue of bonus units.

In a relief to fund houses and investors, the Central Board of Direct Taxes (CBDT) has clarified that AMCs won’t have to pay any tax on redemptions and on issue of bonus units.

Tax authorities were demanding AMCs to pay additional income tax under sub-section (2) to section 115R of the Income Tax Act on payment made to investors at the time of redemptions and issue of bonus units to investors.
"Mutual funds have to pay tax before declaring dividends. The tax authorities went a step further and asked some AMCs to pay tax before paying redemption proceeds to investors. Similarly, in the case of bonus units, bonus is converted as income and issued to investors. The CBDT had asked AMCs to pay tax on bonus units also. The industry had made a representation to CBDT on the same," said Jimmy Patel, CEO, Quantum Mutual Fund.

“Sub-section (2) of section 115R of the Act provides that any amount of income distributed by (i) a specified company or (ii) a mutual fund to its unit holders shall be chargeable to tax and such entities shall be liable to pay additional tax on such distributed income at the rates prescribed therein. The income so distributed by such entities is the dividend paid to unit holders and is liable to tax under this section. However, redemption of units would not attract levy of tax under sub section (2) to section 115R of the Act as such income is not of the nature of ‘income distributed’ to unit holders and hence lies outside the purview of this section,” said a CBDT circular issued on February 11.

CBDT clarified that issue of bonus units is akin to distribution of income by way of dividend and is hence exempted from paying any additional income tax.

Bonus units are issued to existing unit holders as a way to reward them. Unlike dividends where investors get money, bonus units result in additional units being created in the fund. Not many fund houses give bonus units to investors any more.

In another case, Central Board of Direct Taxes (CBDT) had earlier asked some AMCs to cough up income tax for investment made in pass through certificates (PTC) in year 2008-2009

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Content Management System developers CMS developers Content Management Solutions CMS Solutions CMS India Content Management System India CMS development India Website CMS Website Content Management India Portal CMS India CMS Outsourcing CMS Vendor Complete CMS Custom CMS Services

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions