[Important] Sec 194K-Tax Deduction On Mutual Fund Units Income

Tax Deduction On Mutual Fund Units Income

1. This new provision, Section 194K, withdraws the exemption regarding income from units of mutual funds by abolishing Section 10(35).
2. As per Section 194K, any person responsible for paying a resident with respect to:

• Units of a mutual fund as per Section 10(23D)
• Units from the administrator
• Units from a specified company

Rate of TDS U/S 194k

1. TDS at 10% at the time of credit of such income to the payee’s account exceeding Rs 5,000 or at the time of making payment, whichever is earlier.
2. TDS should be deducted at 20% if the investor does not provide PAN.
3. In the case of NRI investors, TDS should be deducted as per Section 195.

Exceptions to U/S 194k

TDS under Section 194K is not required to be deducted in the following cases:

• Tax at 10% is not required to be deducted at source if the dividend income is up to Rs 5,000 in a financial year.
• Capital gain income is also exempted from the applicability of Section 194K.