Section 194K: TDS Limit on MF Income Increased from 1st April 25

Sahil Jaiswal | Last updated: 23 December 2025

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Quick Summary

Section 194K of the Income Tax Act governs Tax Deducted at Source (TDS) on mutual fund income, specifically dividend income. Currently, a 10% TDS is applied if the annual mutual fund income exceeds ₹5,000. The government has proposed an amendment, effective April 1, 2025, to increase this threshold, offering relief to small investors. It's important to note that this section only applies to dividend income and not to capital gains, which are taxed separately.

Meaning of Section 194K Section 194K of the Income Tax Act pertains to the deduction of Tax Deducted at Source (TDS) on income from mutual funds. This section was introduced to ensure tax compliance and prevent tax evasion on investment income. It applies to any person making payments in the

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FAQ :

Section 194K of the Income Tax Act deals with the deduction of Tax Deducted at Source (TDS) on income derived from mutual funds.

Currently, no TDS is deducted if the total income from mutual funds during a financial year does not exceed ₹5,000. A TDS rate of 10% applies to income above this limit.

The government has proposed to increase the TDS threshold limit for mutual fund income, providing relief to small investors. The amendment also aims to clarify which types of mutual fund income are subject to TDS.

No, Section 194K only applies to dividend income from mutual funds. Capital gains from the sale of mutual fund units are taxed under separate capital gains provisions.

Penalties include interest charges (1% per month for non-deduction, 1.5% per month for non-deposit), a late fee of ₹200 per day, disallowance of expenses, and potentially prosecution.