In a relief to mutual fund distributors, industry body Amfi has put in place a new computation method that will help in reducing their service tax payments.

Mutual fund distributors are required to pay service tax from the commissions earned by them.

“Amfi has framed a computation method of service tax deduction which reduces net service tax payout to Rs 12.28 on every Rs 100 paid as commission to distributors,” a member of the industry body said.

“The gross service tax is 14 per cent but the net service tax payout comes down to 12.28 per cent through this method,” he added.

In case a distributor is entitled to get Rs 100 and service tax is 14 per cent, then tax will be calculated as net service tax payout = commission payout u2013 commission payout X gross service tax rate/commission payout + service tax.

In other words, the net commission payout works out to Rs 87.72 (Rs 100-Rs 12.28) instead of Rs 86.
The service tax on mutual fund distributors came into effect from June 1, 2015.