03 July 2023
My daughter has an NRO account which was converted from normal Indian SB account to NRO in Oct-22 as her status changed to NRI. All the money in the NRO account are from Income in India - SB Bank Interest (from old SB A/C & NRO A/C) and Dividends from MF. The mutual funds where bought before conversion to NRO account and the holder status of MF were also changed to NRI in Nov-22. In 26AS under the MF Company there are entries for MF dividends under sec 194K where the TDS is at 10% for MF dividends from Apr-22 to Oct-22 and dividends from Nov-22 to Mar-23 are under sec 196A where TDS is @ 20%. AIS stmt also shows the MF dividend in two groups - one under Sec 194K - Rs 26306/- and other under Sec 196A -Rs 15032. In Schedule OS -under which heads will the two amounts be entered : - Amt of Rs 26306/- given under sec 194K will be entered under the head 'Dividend Income [Oher than (ii)] - Amt of Rs 15032/- given under sec 196A will be entered under the head '115A (1)(a)(i) Dividends in case of non-residents' or 'Income in respect of units of non-resident u/s 115A(1)(a)(iiab)
06 July 2024
In the context of your daughter's NRO account and the dividends received from mutual funds, here’s how you should categorize the amounts in Schedule OS of the Income Tax Return (ITR):
### Dividend Income Categorization:
1. **Amount under Section 194K (Rs 26,306):** - Dividends received under Section 194K are subject to TDS (Tax Deducted at Source) at a rate of 10%. This section applies to dividends from mutual funds and is specific to resident individuals and HUFs. - Enter this amount under the head **"Dividend Income [Other than (ii)]"** in Schedule OS of the ITR. This is because Section 194K applies to dividends paid to residents.
2. **Amount under Section 196A (Rs 15,032):** - Dividends received under Section 196A are subject to TDS at a rate of 20%. This section applies to dividends paid to non-residents, including NRIs. - Enter this amount under the head **"115A(1)(a)(i) Dividends in case of non-residents"** in Schedule OS of the ITR. Section 115A deals specifically with income in respect of units of non-residents (NRIs).
### Explanation:
- **Section 194K (Rs 26,306):** This amount represents dividends received when your daughter was still a resident for tax purposes (up to October 2022). Since she was a resident during this period, the dividends are categorized under the general "Dividend Income" section applicable to residents.
- **Section 196A (Rs 15,032):** This amount represents dividends received after your daughter’s status changed to NRI (from November 2022 to March 2023). Section 196A applies to dividends paid to non-residents (NRIs), hence it is categorized under the specific head related to non-resident dividends in Schedule OS.
### Reporting in ITR:
- Ensure that you accurately enter these amounts in the respective sections of Schedule OS while filing the Income Tax Return (ITR) for your daughter. This will ensure compliance with tax laws and proper reporting of dividend income based on residency status and applicable TDS rates.
If you have any doubts or if the amounts are significant, it’s advisable to consult with a tax advisor or accountant who can provide personalized guidance based on your specific situation and ensure accurate reporting in the ITR.
CAclubindia
