Question

17. Dividends declared by Unit Trust of India is
(1.5 Points)
Fully exempt in the hands of unit holder
Fully taxable in the hands of unit holder
Taxable but deduction is allowed under
sec. 80
None of the above​

Answer 1

Answer:

fully exempt in the hands of unit holders

Answer 2

Answer:

Option - Dividends declared by Unit Trust of India are fully exempt in the hands of the unit holder.

Explanation:

• The income from other sources heading applies to the dividend received in the case of shares, as well as income from the Unit Trust of India (UTI) or other mutual funds.
• Any income resulting from the transfer of a capital asset, which must be a unit of the Unit Scheme, 1964, as specified in Schedule I to the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002, and which occurs on or after April 1st, 2002, shall be completely exempt.
• Investors' dividends from mutual funds were tax-free up until the end of March 2020. (FY 2019-20).
• The reason for this was that the corporation that was reporting dividends had already paid the dividend distribution tax (DDT) before paying the dividend.
• The Finance Act of 2020 did, however, alter the way dividends are taxed.
• Due to the withdrawal of the DDT on dividends, any dividends paid on or after 1 April 2020 will be taxable in the hands of the investors.
• A TDS is also imposed by the Finance Act, 2020 on dividend distributions made by mutual funds beginning on or after April 1, 2020.
• On dividend income received from a firm or mutual fund that is paid more than Rs 5,000, the standard rate of TDS is 10%.
• However, the government lowered the TDS rate to 7.5 per cent for distribution between 14 May 2020 and 31 March 2021 as a COVID-19 alleviation measure.
• The Finance Act, 2020 also permits deducting interest costs paid from dividend payments.
• The deduction should not be greater than 20% of dividend income.
• You cannot, however, claim a deduction for any other costs undertaken to receive the dividend income.
• In the aforementioned illustration, only Rs. 1,400 is permitted as an interest deduction if Mr Vinay borrowed money to invest in mutual fund units and paid interest totalling Rs. 3,000 during FY 2020–21.
• The sending of Form 15G/15H A resident can submit form 15G to the business or mutual fund paying the dividend if their expected annual income is below the exemption threshold and they are receiving dividends.
• Similar to this, a senior citizen can submit Form 15H to the organization disbursing the dividend if their estimated annual tax liability is zero.
• A form 15G or form 15H must be submitted to claim dividend income without TDS, and the mutual fund notifies shareholders of the dividend declaration via their registered mail address.
• Depending on their investment objectives, investors can choose between growth and dividend options.
• Therefore, those who want to accumulate money over the long run typically choose the growth option because dividend payments from AMC negate the effect of compounding.
• Both options are provided to you by Clear Tax Invest; they were carefully chosen from the best AMCs in India.

Hence, in the hands of the unit holder, dividends announced by Unit Trust of India are completely exempt.

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