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  • Ask Us ‘There is no TDS on mutual fund commission’

    ‘There is no TDS on mutual fund commission’

    Ask us: Fund houses disburse you commission, which is inclusive of GST.
    Nishant Patnaik Mar 4, 2022

    One of our readers wrote to us with this query:

    Five of us have decided to merge our ARNs and form a company. In your view, which is the best structure – LLP, partnership or private limited?

    Secondly, if we work under sub broking model, what happens to TDS on mutual fund commission? Will there be double incidence of TDS – one at company level and another at individual level.

    Thirdly, if we float a company can we merge our AUMs?

    Finally, can we appoint other sub brokers to our network? Do we need to inform AMFI about this?

    Regards,

    Saiju Philip, Trivandrum, Kerala

    Dear Sajju,

    Thanks for writing to us. Hope you are staying healthy and fit!

    Good to know that five of you have come together and are planning to institutionalize your business by forming a company.

    There are different structure of business and each model has its own benefits. However, we suggest you to go with LLP or private limited.

    LLP

    LLP provides the benefits of limited liabilities of a company and the flexibility of a partnership. The LLP is a separate legal entity and is liable to the full extent of its assets.

    Major advantages of LLP is it is easy to form and the costs are low, liability of each partner is limited. The restrictions are less as compared to a private limited company.

    Private Limited Company

    Private limited companies can have a minimum of 2 members and a maximum of 200 members. The liability of the members is limited.   On paper, private limited companies are just the bigger form of LLPs. The advantages of both the business forms are quite similar like separate legal identity and limited liability. The only difference is that compliances go up in case of private limited companies. Also, you will have access to cheaper credit.

    On tax deduction, there is no TDS on mutual fund commission. Fund houses disburse you commission, which is inclusive of GST.

    However, commission income from insurance and corporate fixed income are subject to GST. Also, even if there is TDS on these products, there is no incident of double TDS. The company will receive commission after deduction of TDS. Now, it is discretion of the company to deduct TDS of their sub broker.

    On merger, you can do asset transfer after taking due permission of investors. You can refer to our previous articles on this topic covered on our Ask Us section.

    Finally, you can appoint sub broker on your own. There is no separate reporting norms for AMFI or CAMS. However, you will have to put in place systems and processes to do this business.

    Hope that we are able to resolve your query.

    Regards,

    Team Cafemutual

    Have a query or a doubt?
    Need a clarification or more information on an issue?
    Cafemutual welcomes all mutual fund and insurance related questions. So write in to us at newsdesk@cafemutual.com

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    4 Comments
    Prakash chandra agrawala · 2 years ago `
    Gst is to be paid by recipient of service not by service provider in RCM. IT MEANS INSURANCE AGENT IS NOT LIABLE TO PAY GST? WHY THE INSURANCE COMPANIES DEDUCT GST FROM AGENT COMMISSION. PLEASE CLARIFY THE SAME.
    Binod Kumar Bihani · 2 years ago `
    There is no Clarity among the Mutual Fund AMC.
    Let me know that after death of KARTA of HUF , his wife can be Karta of HUF because there is no Male Member in the family .She has two Major Daughter unmarried.
    As per AMC ,Wife can not be Karta of Husband HUF after his death & in my client case they told me that elder daughter can only be Karta so please do the KYC in her name & submit the nit Transmission Paper,
    Where as some other AMC told that wife can be Karta as law is amended in 2016.
    Being a distributor ,i would like to get clarification as they are not give any clarification in writing.
    Murari mohan chattopadhyay · 1 year ago `
    My mf brokerage is fully taxable? 50% deduction permitted? Under which section it is fully clarified?
    Murari mohan chattopadhyay · 1 year ago `
    My mf brokerage is fully taxable? 50% deduction permitted? Under which section it is fully clarified?
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