I will be grateful to you if you clarify one position in respect of dividend distribution tax (DDT).

The investor is a company in SEZ and it has received a dividend from its investment in the Mutual funds net of DDT. The company is of the view that since it is situated in a SEZ and enjoys tax exemption, it should not bear the DDT and the Mutual Fund shall refund the DDT deducted from the dividend paid to it. Is the company’s stand tenable?

?Jadhav

DDT is applicable to all investors alike, whether situated in a SEZ or otherwise. Another example of a similar tax applicable to companies that are otherwise exempted from paying tax is FBT.

Of course, one cannot compare DDT and FBT, it is only the concept that though a company may not be otherwise paying tax, certain taxes are nevertheless applicable.

Secondly, DDT essentially is a tax paid by the mutual fund and not the investor. In fact, the dividend, which is the real income stream, is exempted for all investors. Now it is the mutual fund that pays the dividend net of DDT. However, technically, it is the mutual fund that is liable to pay the DDT.

So the company’s view is not tenable in my opinion.

We refer to your Q&As, wherein you have stated that lower TDS on salary can be considered only for a single self occupied residential house.

However, it is contrary to the position, which is further clarified by the Income Tax Department in the FAQs on their website (please refer Question No. 85 on the following link: http://www.incometaxindia.gov.in/questionbank.htm#F84).

We would be grateful, if you can clarify the position of the same .

One view can be that the employer can consider the loss of house property but overall TDS should not be lower as applicable on salary income.

?Dinesh Maheshwari

The employer may adjust such incomes and TDS, subject to the condition that the TDS should not be less than the normal TDS on Salaries.

Loss under the head ‘Income from House Property’, and not under any other head, can be taken into account by the employer even if it results in the TDS going below the normal TDS level. All the same, the employee with an income from house property is required to file his tax returns to enable the Department to check its veracity.

The employer shall furnish to the employee Form-12BA along with Form-16, to be filed by the employee along with his tax returns.

Under which section is the income (Long term and short term) from mutual funds tax-free? Does dividend option save tax in the short term.

?Syyead

For equity-based MF schemes, long-term gain is free from tax u/s 10(38). Short-term gain is exigible to tax at the rate of10% u/s 111(A)

For debt-based schemes the normal rules apply. In other words, short-term gains are treated as normal income of the assessee and taxed at the rates applicable to the assessee. U/s 112 the long-term gains will attract tax at the rate of 10.3% without indexation or 20.6% with indexation, whichever is more beneficial to the assessee.

It is true that the dividends are tax-free in the hands of the investors, but the MF has to pay dividend distribution tax to the exchequer before distributing the dividend to the investors. Fortunately, u/s 115R(2) no DDT is to be levied on equity-based funds, open-ended or close-ended.

I have a query on tax liability on selling of delisted shares. Recently I have sold Syngenta India Ltd. These shares got delisted from the exchange 2 months ago and the company has given a buy back offer of this share at the rate of Rs. 730 per share, and I have accepted the offer and transferred the shares in their DP account from my DP account and sent them the required acceptance forms. I think I have not paid any security transaction tax (STT) on this transfer as it was an off market transaction.

Will I get exemption from paying tax on this sale, as the cost of these shares are very low for me and I have got these shares approximately 3 years ago.

?Mendha

Yes, you are right. There is no STT applied and therefore, the long-term capital gains would be charged to tax at the rate of 10% without indexation or 20% with indexation, whichever is lower.

?The authors may be contacted at wonderlandconsultants@yahoo.com