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Mutual fund

09 March 2014

under Sec 115-R MF have to pay tax on distribution to unit holder.....I want to know whether MF pays the tax additionally or it pays out of the income of Unit holder???

IF suppose MF want to distribute 100 rs to Unit holder...applicable tax rate is 25% then

whether MF pays such 25 Rs additionally and 100 RS to Unit holder

Pays 25 RS out of Such 100 and pays to Unit holder remaining 75????

PLZ support your answer with some case law or reference material......

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1 Replies

SURESHAN K (Auditor) (189 Points)
Replied 09 March 2014

MF pays tax additionally. It is clear from the language of section itself. No need for case law. Please see extraction of the section below:

Tax on distributed income to unit holders.

115R. (1) Notwithstanding anything contained in any other provisions of this Act and section 32 of the Unit Trust of India Act, 1963 (52 of 1963), 35[any amount of income distributed on or before the 31st day of March, 2002 by the Unit Trust of India to its unit holders] shall be chargeable to tax and the Unit Trust of India shall be liable to pay additional income-tax on such distributed income at the rate of 36[ten] per cent :

Provided that nothing contained in this sub-section shall apply in respect of any income distributed to a unit holder of open-ended equity oriented funds in respect of any distribution made from such fund for a period of three years commencing from the 1st day of April, 1999.

37[(2) Notwithstanding anything contained in any other provision of this Act, any amount of income distributed by the specified company or a Mutual Fund to its unit holders shall be chargeable to tax and such specified company or Mutual Fund shall be liable to pay additional income-tax on such distributed income 38[at the rate of—

39[(i) twenty-five per cent on income distributed 40[to any person being an individual or a Hindu undivided family] by a money market mutual fund or a liquid fund;

40[(ia) thirty per cent on income distributed to any other person by a money market mutual fund or a liquid fund;]

(ii) 40a[twenty-five] per cent on income distributed to any person being an individual or a Hindu undivided family by a fund other than a money market mutual fund or a liquid fund; and

(iii) 41[thirty] per cent on income distributed to any other person by a fund other than a money market mutual fund or a liquid fund:]]