Mutual fund Dividend Income

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This discussion addresses how an NRI should report dividend income received from a mutual fund in their Income Tax Return (ITR). The user's brother had TDS deducted on mutual fund dividends, but the income was incorrectly shown in the AIS under a special category, leading to an unexpected tax liability. The advice suggests checking if the units were purchased in foreign currency or from an NRE account, and if not, contacting the mutual fund house to rectify the data for correct tax slab reporting and potential full TDS refund.

Gaurav Sharma

Gaurav Sharma (Querist)
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04 July 2024 My brother has an NRI status and has received dividends from HDFC Mutual Fund for Rs 6531 u/s 196A and TDS @ 20.8%+ is deducted and deposited as per 26AS. As per my understanding this amount needs to be entered either in Sch - Other Sources (OS) or in sub-section 115A(1)(a)(i)- Dividends in case of non-residents under Schedule -SI (Income Chargeable at Special Rate). But in the AIS Summary the amount is shown in Schedule -SI (Special income) under 'Income received in respect of units of UTI purchased in Foreign Currency u/s 115A(1)(a)(iii)' which is leading to tax liability of Rs 1359 i.e., equivalent to 20.8% of dividend income.
My brother has total taxable income ( from dividend and saving bank interest) of Rs. 120,000 during the FY 2023-24 hence accordingly he should be eligible for full TDS refund but in this case his refund amount is getting reduced by the tax liability of Rs. 1359 occurred due to mutual fund dividend income reported under u/s 115A(1)(a)(iii) of Schedule -SI.
Please advise the correct way of reporting this particular income in ITR.
Thanks for your time and help.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 July 2024 If the units were not purchased in foreign currency or from NRE account, report the issue to Mutual fund agency to rectify the data.

Gaurav Sharma

Gaurav Sharma (Querist)
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04 July 2024 Thanks for your prompt reply and kind guidance, really appreciate your help. Just for your information these units were purchased through NRO account and as advised I have raised this concern with MF house. Let's see when they respond. One last this to clarify, if MF house rectify the data then where it will appear in AIS and can we claim full refund of the TDS deducted on this dividend income. Thanks again

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 July 2024 Yes, if the data shifts to taxable as per slab rate.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 August 2024 Good luck.

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