# Section 194K - TDS on Income from Units (Other than Capital Gains)

## Who Deducts

Any person responsible for paying income in respect of:

Units of a Mutual Fund, OR
Units of Administrator of the specified undertaking, OR
Units of a specified company.

## Payee

Any resident.

## Scope

Covers only income other than capital gains — typically dividend / income distribution from units. Capital gains on transfer of units are excluded.

## Threshold

Amount or aggregate > ₹ 10,000 in a F.Y.

## Rate of TDS

10%

## When to Deduct

At the time of credit OR payment, whichever is earlier.

Worked example

### Example 1

Example: A mutual fund pays Mr. K dividend of ₹ 25,000 on his MF units in F.Y.

Solution: Exceeds ₹ 10,000 → TDS @ 10%.

TDS = 10% × ₹ 25,000 = ₹ 2,500.

### Example 2

Example: Mr. L receives capital gains of ₹ 50,000 on redemption of MF units.

Solution: No TDS u/s 194K — capital gains are excluded.

⚠️ Common exam mistakes

Deducting TDS on capital gains from redemption of MF units — 194K does not cover capital gains
Confusing 194K (MF units) with 194 (dividend on shares)

Bare-Act text Section 194K · Income-tax Act, 1961 · click to expand

Any person responsible for paying to a resident any income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or units from the Administrator of the specified undertaking or units from the specified company shall, at the time of credit or payment, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. Provided no deduction where amount does not exceed ₹ 10,000. Provided further that this section does not apply to income of the nature of capital gains.

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Section 194K - TDS on Income from Mutual Fund Units

Worked example

⚠️ Common exam mistakes