Section 194K — the law in short
What the courts have decided on section 194K, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.194K: ten per cent on income in respect of mutual fund units, the ten thousand rupee threshold from 1 April 2025, and why capital gains on units are outside it
CBDT Circulars & InstructionsCuts both ways
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?
No. The section applies to income in respect of units of a specified mutual fund, or units from the Administrator of the specified undertaking or from the specified company, and the second limb of its proviso says in terms that it does not apply 'if the income is of the nature of capital gains'. The rate is ten per cent, and no deduction is made where the income credited or paid, or likely to be credited or paid, during the financial year does not exceed ten thousand rupees — a figure substituted for five thousand rupees with effect from 1 April 2025.
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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
CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
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No section was repealed.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.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.