Agricultural income is tax-free

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: My query is that as per SBI, they have floated SBI SDS 90 DAYS mutual Fund in debt series under dividend and growth options. As per SBIMF, if one invests for 90 days in SBI SDS debt series mutual fund under the dividend option, the dividend will be totally tax free. Does this mean it will be like GOI tax-free bonds and no tax will have to be paid on the dividend amount credited to my account?

Also, the capital will be returned to me at the end of 90 days (in dividend option) and will not attract short term capital gains tax. Am I correct?

—M D master

Your capital in the fund that will be returned to you at the end of 90 days is a capital receipt and the same is not taxable. The dividend too is technically not taxable in your hands. However, it is not tax-free in the nature of GOI tax-free bonds are. The reason is that though the dividend per se, is tax-free in your hands, the fund pays a dividend distribution tax of 14.1625% to the government before distributing the dividend. In other words, on account of this tax (which is paid by the MF directly) you receive that much lesser dividend. So in effect, it is the investor who bears the tax though paid by the mutual fund.

Q: Though I file my tax return every year, I face a difficulty. My total income after claiming the benefit of the deductions under Chapter-VIA (Sec 80C to Sec 80U) is under the tax threshold of Rs 1,50,000. Therefore, I can file Form-15G with all those who pay some income to me and apply TDS thereon, requesting them not to apply TDS. I am told that I have this right to file this Form if and only I fulfill yet another condition. Please elaborate on this other condition to enable me to file the form if I am eligible to do so.

—Mundra

Sec 197A read with Rule 29C provides to residents furnishing declarations by the payees in Form-15G (Form-15H for senior citizens) in order to enable the payer make the payment without deduction of tax at source if the tax payable on his estimated total income is nil.

The declaration under Form-15G can be filed only if both the following conditions are satisfied —