Everyone says DDT was abolished in 2020. Which provision actually did it, from what date, and what withholding took its place on dividend and on mutual fund income?
No section was repealed. The abolition was done by writing an end-date into the charging words themselves: s.115-O(1) now charges only dividend declared, distributed or paid 'on or after the 1st day of April, 2003 but on or before the 31st day of March, 2020'; s.115R(2) charges only income distributed by a specified company or Mutual Fund 'on or before the 31st day of March, 2020'; and s.115BBDA(1) reaches only dividend 'declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020'. Dividend then fell to be taxed in the shareholder's hands, with withholding revived under s.194 for dividend paid by a company and s.194K for income in respect of mutual fund units, both at ten per cent.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Section 115-O of the Income-tax Act, 1961, as amended up to 2026. It bears on section 115-O, section 115-O(1), section 115R, section 115R(2), section 115BBDA, section 194, section 194K, section 2(22), section 10(23D), section 10(23FC) of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Knowing that the sections were amended rather than omitted is not pedantry — it decides how you read them. The sections still stand in the Act, so a notice or an appeal for FY 2019-20 or earlier is decided on the full text of s.115-O, s.115R and s.115BBDA as it applied in that year, and nothing about the 2020 change touches those years. It also means the cut-off is a distribution-date test, not an assessment-year test: a dividend declared on 30 March 2020 and paid on 5 April 2020 is inside s.115-O on the 'declared' limb, because the section charges an amount 'declared, distributed or paid' and the earliest of those events is what s.115-O(3) fixes payment to. On the replacement withholding, three points repay attention. Section 194 requires the principal officer of an Indian company, or a company which has made the prescribed arrangements for the declaration and payment of dividends within India, to deduct ten per cent before making any payment by any mode in respect of any dividend, or before making any distribution or payment to a resident shareholder of any dividend within the meaning of s.2(22)(a) to (f) — note that the deemed dividend sub-clauses are inside the deduction obligation. Its first proviso exempts an individual shareholder where the dividend is paid by any mode other than cash and the amount or aggregate for the financial year does not exceed ten thousand rupees; the section carries footnote 66, 'Sub. for "five" by Act No. 7 of 2025, w.e.f. 1-4-2025', so the threshold was five thousand rupees before 1 April 2025 and ten thousand from that date. Its second proviso exempts the Life Insurance Corporation, the General Insurance Corporation and the four companies formed under s.16(1) of the General Insurance Business (Nationalisation) Act, 1972, any other insurer in respect of shares it owns or in which it has full beneficial interest, a business trust receiving from a s.10(23FC) special purpose vehicle, and any person notified by the Central Government. Section 194K is the mutual fund limb: ten per cent on income in respect of units of a s.10(23D) Mutual Fund, units from the Administrator of the specified undertaking, or units from the specified company, at credit or payment whichever is earlier, with a proviso disapplying it where the income for the financial year does not exceed ten thousand rupees, or 'if the income is of the nature of capital gains'. The capital gains carve-out is the point most often got wrong: redemption proceeds and switch-outs are outside s.194K entirely. Footnote 92 to that section reads 'Sub. for "five" by Act No. 7 of 2025, w.e.f. 1-4-2025', so the s.194K threshold too was five thousand rupees until 31 March 2025. And s.194K has a history worth knowing: an earlier text of s.194K records the section as 'Omitted by the Finance Act, 2016, w.e.f. 1-6-2016', so the section that exists today is a revived one and any authority on the pre-2016 s.194K must be handled with that in mind.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 115-O(1) charges an amount declared, distributed or paid by way of dividends 'on or after the 1st day of April, 2003 but on or before the 31st day of March, 2020'. Section 115R(2) charges income distributed by the specified company or a Mutual Fund to its unit holders 'on or before the 31st day of March, 2020'. Section 115BBDA(1) reaches dividends 'declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020'. Section 194 requires the principal officer of an Indian company, or of a company which has made the prescribed arrangements for the declaration and payment of dividends within India, before making any payment by any mode in respect of any dividend or before making any distribution or payment to a resident shareholder of any dividend within the meaning of s.2(22)(a), (b), (c), (d), (e) or, from 1 October 2024, (f), to deduct income-tax at ten per cent, with a first proviso exempting an individual shareholder paid otherwise than in cash where the dividend for the financial year does not exceed ten thousand rupees, and a second proviso exempting the Life Insurance Corporation, the General Insurance Corporation and the four companies formed under s.16(1) of the General Insurance Business (Nationalisation) Act, 1972, any other insurer in respect of shares it owns or beneficially owns in full, a business trust receiving from a s.10(23FC) special purpose vehicle, and notified persons. Section 194K requires any person paying to a resident income in respect of units of a s.10(23D) Mutual Fund, units from the Administrator of the specified undertaking or units from the specified company, to deduct ten per cent at credit or payment whichever is earlier, with a proviso disapplying the section where the income for the financial year does not exceed ten thousand rupees or where the income is of the nature of capital gains, and two Explanations.
The dividend distribution tax regime was ended not by omitting any section but by confining the charging words of s.115-O(1), s.115R(2) and s.115BBDA(1) to distributions on or before 31 March 2020; from then dividend is taxed in the recipient's hands with withholding at ten per cent under s.194 on company dividend and s.194K on income in respect of mutual fund units, the latter expressly not reaching income of the nature of capital gains.
This is statutory text, not a decision. The technique of the amendment is the point: because the sections survive with a closed window rather than being repealed, they continue to govern every earlier year without any need for a savings provision, and the test of whether a distribution falls inside or outside the old regime is the date on which it was declared, distributed or paid.
if the income is of the nature of capital gains.
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Handle my notice → Ask a CA on WhatsAppNo section was repealed. The abolition was done by writing an end-date into the charging words themselves: s.115-O(1) now charges only dividend declared, distributed or paid 'on or after the 1st day of April, 2003 but on or before the 31st day of March, 2020'; s.115R(2) charges only income distributed by a specified company or Mutual Fund 'on or before the 31st day of March, 2020'; and s.115BBDA(1) reaches only dividend 'declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020'. Dividend then fell to be taxed in the shareholder's hands, with withholding revived under s.194 for dividend paid by a company and s.194K for income in respect of mutual fund units, both at ten per cent. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115-O, section 115-O(1), section 115R, section 115R(2), section 115BBDA, section 194, section 194K, section 2(22), section 10(23D), section 10(23FC) of the Income Tax Act 1961. It is reported as Section 115-O of the Income-tax Act, 1961, as amended up to 2026. Knowing that the sections were amended rather than omitted is not pedantry — it decides how you read them. The sections still stand in the Act, so a notice or an appeal for FY 2019-20 or earlier is decided on the full text of s.115-O, s.115R and s.115BBDA as it applied in that year, and nothing about the 2020 change touches those years. It also means the cut-off is a distribution-date test, not an assessment-year test: a dividend declared on 30 March 2020 and paid on 5 April 2020 is inside s.115-O on the 'declared' limb, because the section charges an amount 'declared, distributed or paid' and the earliest of those events is what s.115-O(3) fixes payment to. On the replacement withholding, three points repay attention. Section 194 requires the principal officer of an Indian company, or a company which has made the prescribed arrangements for the declaration and payment of dividends within India, to deduct ten per cent before making any payment by any mode in respect of any dividend, or before making any distribution or payment to a resident shareholder of any dividend within the meaning of s.2(22)(a) to (f) — note that the deemed dividend sub-clauses are inside the deduction obligation. Its first proviso exempts an individual shareholder where the dividend is paid by any mode other than cash and the amount or aggregate for the financial year does not exceed ten thousand rupees; the section carries footnote 66, 'Sub. for "five" by Act No. 7 of 2025, w.e.f. 1-4-2025', so the threshold was five thousand rupees before 1 April 2025 and ten thousand from that date. Its second proviso exempts the Life Insurance Corporation, the General Insurance Corporation and the four companies formed under s.16(1) of the General Insurance Business (Nationalisation) Act, 1972, any other insurer in respect of shares it owns or in which it has full beneficial interest, a business trust receiving from a s.10(23FC) special purpose vehicle, and any person notified by the Central Government. Section 194K is the mutual fund limb: ten per cent on income in respect of units of a s.10(23D) Mutual Fund, units from the Administrator of the specified undertaking, or units from the specified company, at credit or payment whichever is earlier, with a proviso disapplying it where the income for the financial year does not exceed ten thousand rupees, or 'if the income is of the nature of capital gains'. The capital gains carve-out is the point most often got wrong: redemption proceeds and switch-outs are outside s.194K entirely. Footnote 92 to that section reads 'Sub. for "five" by Act No. 7 of 2025, w.e.f. 1-4-2025', so the s.194K threshold too was five thousand rupees until 31 March 2025. And s.194K has a history worth knowing: an earlier text of s.194K records the section as 'Omitted by the Finance Act, 2016, w.e.f. 1-6-2016', so the section that exists today is a revived one and any authority on the pre-2016 s.194K must be handled with that in mind. If it applies to you, the first step is this: For any year up to FY 2019-20, apply s.115-O, s.115R and s.115BBDA in full — they were amended, not repealed, and the sections remain in the Act.
Section 115-O(1) charges an amount declared, distributed or paid by way of dividends 'on or after the 1st day of April, 2003 but on or before the 31st day of March, 2020'. Section 115R(2) charges income distributed by the specified company or a Mutual Fund to its unit holders 'on or before the 31st day of March, 2020'. Section 115BBDA(1) reaches dividends 'declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020'. Section 194 requires the principal officer of an Indian company, or of a company which has made the prescribed arrangements for the declaration and payment of dividends within India, before making any payment by any mode in respect of any dividend or before making any distribution or payment to a resident shareholder of any dividend within the meaning of s.2(22)(a), (b), (c), (d), (e) or, from 1 October 2024, (f), to deduct income-tax at ten per cent, with a first proviso exempting an individual shareholder paid otherwise than in cash where the dividend for the financial year does not exceed ten thousand rupees, and a second proviso exempting the Life Insurance Corporation, the General Insurance Corporation and the four companies formed under s.16(1) of the General Insurance Business (Nationalisation) Act, 1972, any other insurer in respect of shares it owns or beneficially owns in full, a business trust receiving from a s.10(23FC) special purpose vehicle, and notified persons. Section 194K requires any person paying to a resident income in respect of units of a s.10(23D) Mutual Fund, units from the Administrator of the specified undertaking or units from the specified company, to deduct ten per cent at credit or payment whichever is earlier, with a proviso disapplying the section where the income for the financial year does not exceed ten thousand rupees or where the income is of the nature of capital gains, and two Explanations. The matter was decided on 2020-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. The dividend distribution tax regime was ended not by omitting any section but by confining the charging words of s.115-O(1), s.115R(2) and s.115BBDA(1) to distributions on or before 31 March 2020; from then dividend is taxed in the recipient's hands with withholding at ten per cent under s.194 on company dividend and s.194K on income in respect of mutual fund units, the latter expressly not reaching income of the nature of capital gains.
This is statutory text, not a decision. The technique of the amendment is the point: because the sections survive with a closed window rather than being repealed, they continue to govern every earlier year without any need for a savings provision, and the test of whether a distribution falls inside or outside the old regime is the date on which it was declared, distributed or paid. In the words reproduced by the source cited on this page: "if the income is of the nature of capital gains."
It was decided by the CBDT Circulars & Instructions on 2020-04-01 and is reported as Section 115-O of the Income-tax Act, 1961, as amended up to 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115-O, section 115-O(1), section 115R, section 115R(2), section 115BBDA, section 194, section 194K, section 2(22), section 10(23D), section 10(23FC), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The dividend distribution tax regime was ended not by omitting any section but by confining the charging words of s.115-O(1), s.115R(2) and s.115BBDA(1) to distributions on or before 31 March 2020; from then dividend is taxed in the recipient's hands with withholding at ten per cent under s.194 on company dividend and s.194K on income in respect of mutual fund units, the latter expressly not reaching income of the nature of capital gains. It arises in TDS Defaults and How Tax Law Is Read matters, on section 115-O, section 115-O(1), section 115R, section 115R(2), section 115BBDA, section 194, section 194K, section 2(22), section 10(23D), section 10(23FC) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Test the cut-off on the distribution date, not the assessment year: s.115-O charges an amount 'declared, distributed or paid' and s.115-O(3) runs from the earliest of the three. From 1 April 2020 onward, look for the tax in the shareholder's hands and for withholding under s.194 or s.194K, not for a company-level charge. On a s.194 default, check the first proviso before conceding: an individual shareholder paid by a mode other than cash, with dividend not exceeding the threshold for the year, attracts no deduction — ten thousand rupees from 1 April 2025 and five thousand before that, on the departmental footnote. On s.194 also run the second proviso: LIC, GIC and the four nationalisation companies, any other insurer in respect of shares it owns or beneficially owns in full, a business trust receiving from a s.10(23FC) special purpose vehicle, and notified persons are outside the section. On s.194K, separate income in respect of units from capital gains on units. The proviso disapplies the section 'if the income is of the nature of capital gains', so redemptions and switch-outs are outside it. Before citing an older s.194K authority, check the vintage: the section was omitted by the Finance Act 2016 with effect from 1 June 2016 and later revived.
Superseded by amendment. The core of the entry stands: the end-dates written into s.115-O(1), s.115R(2) and s.115BBDA(1) have not been disturbed, and no section was repealed. But two of the withholding provisions the entry describes as having replaced DDT have themselves been amended since. The Finance Act, 2025 substituted 'ten thousand rupees' for 'five thousand rupees' in the first proviso to section 194, and in clause (i) of the proviso to section 194K, with effect from 1 April 2025 - confirmed on the Department's own Notes on Clauses to the Finance Bill, 2025. So any Rs 5,000 no-deduction threshold stated for s.194 or s.194K holds only for payments up to 31 March 2025; for FY 2025-26 (AY 2026-27) the figure is Rs 10,000. The Finance Act, 2025 also omitted the reference to section 206AB in s.194S(2) with effect from 1 April 2025. This states the law under the Income-tax Act, 1961, which governs every assessment year up to and including AY 2026-27 and the disputes arising from those years. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The end-dates are read from the sections themselves: s.115-O(1), s.115R(2) and s.115BBDA(1). That the end-dates were inserted later, and are not part of the original text, is shown by earlier texts of two of them — an earlier s.115-O(1) prints the sub-section WITHOUT the words 'but on or before the 31st day of March, 2020', and an earlier s.115BBDA(1) prints that sub-section without its corresponding words. That is legislative history, used to date an amendment and not to state the current position. The text of the Finance Act 2020 itself is not set out here, and ss.115-O, 115R and 115BBDA carry no footnote list, so the Act number and the commencement date for the insertion of those end-dates are NOT verified in this entry: it attributes the change to no named Act. Section 194, headed 'Dividends', and s.194K, headed 'Income in respect of units', do carry footnotes. In s.194 the text prints "...or sub-clause (e) [65] [or sub-clause (f)] of clause (22) of section 2...", and footnote 65 — "Ins. by Act No. 15 of Act, 2024, w.e.f. 1-10-2024" — inserted the reference to s.2(22)(f) into s.194 with effect from 1 October 2024, so a deemed dividend within s.2(22)(f) was outside the s.194 deduction obligation before that date. That Act number is not matched to a Finance Act name from an independent source. For the ten thousand rupee thresholds, footnote 66 to s.194 and footnote 92 to s.194K, both reading 'Sub. for "five" by Act No. 7 of 2025, w.e.f. 1-4-2025', are relied on, and each relates to a 'five thousand rupees' threshold in the respective proviso. The text of s.10(34) and s.10(35) is NOT set out here, so this entry says nothing about the fate of those exemptions; read them for yourself before advising that a dividend is exempt in the shareholder's hands for a pre-2020 year. On the date in decided_on: this is a statutory-position entry and 2020-04-01 is not a decision date. It is the commencement date of the transition this entry describes — 1 April 2020, the day after the 31 March 2020 end-date written into the charging words of s.115-O(1), s.115R(2) and s.115BBDA(1). The Act that inserted those end-dates and its formal commencement notification are not established here, so the field records the date the sections' own words fix and not a verified commencement notification. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The dividend distribution tax regime was ended not by omitting any section but by confining the charging words of s.115-O(1), s.115R(2) and s.115BBDA(1) to distributions on or before 31 March 2020; from then dividend is taxed in the recipient's hands with withholding at ten per cent under s.194 on company dividend and s.194K on income in respect of mutual fund units, the latter expressly not reaching income of the nature of capital gains.
TaxSphere, “Statutory position — how DDT was abolished: the end-date written into s.115-O(1), s.115R(2) and s.115BBDA(1), and the withholding that replaced it under s.194 and s.194K”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-dividend-tax-transition-2020-how-ddt-was-abolished/ (validity last checked 2026-09-08)
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My client is a mutual fund trustee and has a demand for tax on income distributed to unit holders for a year before 2020. What rate applied to which kind of fund, what was exempt, and who is in default?
My company paid dividend distribution tax for a year before 2020 and the Assessing Officer is now recomputing it. What does s.115-O actually charge, at what rate, and on what base?
My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
My mutual fund has deducted ten per cent under section 194K. Should it be deducting on the redemption proceeds and on my capital gains as well, and what is the threshold now?
