The provisions relating to TDS on income in respect of units have been restructured under the Income-tax Act, 2025. The earlier Section 194K of the Income-tax Act, 1961 is now covered under Section 393(1) [Table: Sl. No. 4(i)], effective from 1st April, 2026.
This restructuring introduces a tabular classification while continuing the existing provisions relating to deduction of tax on income from units of mutual funds and specified entities.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 393(1)
- Table Reference: Table: Sl. No. 4(i)
- Nature of Payment: Income payable to a resident assessee in respect of units of a specified Mutual Fund or specified undertaking or specified company
- Earlier Section (IT Act 1961): Section 194K
- Return Form: 26Q
- Code (for return filing): 1013
Applicability of TDS on Income from Units
Any person responsible for paying income in respect of units is required to deduct tax at source.
This includes income from:
- Units of a Mutual Fund
- Units from the Administrator of a specified undertaking
- Units from a specified company
Deductor
- Any person responsible for paying income in respect of units
Deductee
- A resident
Time of Deduction
- At the time of credit, or
- At the time of payment
Rate of TDS
- 10% on income in respect of units
TDS Exemptions under Section 194K
- Income up to ₹10,000 in a financial year
- Submission of Form 121 by eligible individuals
- Payments to non-residents (covered under 393(2) [Table: Sl. No. 10])
TDS Deduction Rules for Mutual Funds
- Deduct 10% TDS on dividend payments exceeding ₹10,000
- Verify PAN details for correct TDS rate
- Deduct TDS before crediting income
- Deposit TDS within prescribed timelines
- Report in Form 168 and issue Form 131
Important Note
- Capital gains are not covered under this section and are taxable separately as per applicable capital gains provisions
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