Due to practical difficulties in tracking dividend income at PAN-level, many fund houses have decided to deduct TDS irrespective of dividend income.  As a result, many fund houses have started deducting 10% TDS on dividend income from April 1, 2020 even if it does not exceed Rs.5000.

In an FAQ released recently, HDFC Mutual Fund and ICICI Prudential MF said that since the threshold limit is applicable for aggregate dividend paid in a financial year, it has to be computed at the PAN level. “However, on account of practical difficulties involved due to unique nature of mutual fund investments and different schemes involved, both the fund houses deduct TDS from each dividend declared i.e. even without reaching Rs.5,000 threshold. In case of total TDS exceeding the actual tax liability of any investor, he can claim refund while filing income-tax return,” the fund houses said.

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