prpri Section 194K TDS on Income In Respect of Units of Mutual Fund Section 194K TDS on Income In Respect of Units of Mutual Fund

1) Who is responsible to deduct tax under Section 194K of Income Tax Act, 1961?

a) Any person responsible for making the payment to a resident in respect of

b) units of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India,

c) units from the Administrator of the specified undertaking; or (c) units from the specified company

d) units from the specified company, shall,

 where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person responsible for making the payment to the account of, or to, the payee does not exceed five thousand rupees; or (ii) if the income is of the nature of capital gains.

2) When to Deduct TDS under Section 194K?

At the time of credit of such income to the account of payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

3) Threshold Limit for deducting TDS?

Tax has to be deducted in this section if the payment is more than Rs.5000

4) Rate of TDS Under section 194 K?

Deduct income-tax thereon at the rate of 10%. (7.5% w.e.f. 14.05.2020 to 31.03.2021)

5) Non applicability of Section 194 K

(i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person responsible for making the payment to the account of, or to, the payee does not exceed five thousand rupees; or

(ii) if the income is of the nature of capital gains

6) 194K- Income in respect of units 

With effect from April 1,2020
Applicability Any income in respect of

  • Units of MF u/s 10(23D)
  • Units from specified company
  • Units from specified undertakings
Tax rate 10%
Threshold Limit Aggregate amount exceeds Rs. 5,000
Liable to deduct At the time of credit or payment, whichever is earlier

Extract of Section 194K of Income Tax Act, 1961

Section 194K TDS on Income In Respect of Units of Mutual Fund

194K. Any person responsible for paying to a resident any income in respect of—

(a) units of a Mutual Fund specified under clause (23D) of section 10; or

(b) units from the Administrator of the specified undertaking; or

(c) units from the specified company,

shall, at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent:

Provided that the provisions of this section shall not apply—

(i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person responsible for making the payment to the account of, or to, the payee does not exceed five thousand rupees; or

(ii) if the income is of the nature of capital gains.

Explanation 1.—For the purposes of this section,—

(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(b) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(c) “specified undertaking” shall have the meaning assigned to it in clause (i) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002).

Explanation 2.—For the removal of doubts, it is hereby clarified that where any income referred to in this section is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

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