- Section 194F TDS on Payments on account of repurchase of units by Mutual Fund or UTI
- Introduction:
- Section 194F of the Income Tax Act, 1961, deals with the provisions for the deduction of tax at source (TDS) on payments made on account of repurchase of units by Mutual Fund or UTI. In this blog, we will discuss the key provisions of Section 194F and the implications of non-compliance with the TDS provisions.
- Provisions of Section 194F:
- 1) As per Section 194F, any person
making payment on account of repurchase of units by a Mutual Fund or UTI shall
deduct TDS at the rate of 20%. However, no TDS shall be deducted if the
aggregate amount of such payment is less than Rs. 50,000 in a financial year.
- 2) The person making the payment shall
be liable to deduct TDS and deposit the same with the government within 7 days
from the end of the month in which the deduction was made. The TDS deducted
should be deposited using challan-cum-statement in Form No. 26QB.
- Implications of Non-compliance:
- Non-compliance with the TDS provisions of Section 194F can result in the following consequences:
- · Interest on Late Payment: If the TDS is not deposited within
the due date, interest will be levied on the amount of TDS at the rate of 1.5%
per month or part of the month.
- · Penalty: If the TDS is not deposited within
one year from the due date, a penalty can be imposed on the deductor ranging
from Rs. 10,000 to Rs. 1,00,000.
- · Disallowance of Expenses: If the TDS is not deducted or
deposited, the expenditure on which TDS was required to be deducted or paid
shall be disallowed as a deduction while computing the income of the payer.
- Conclusion:
- Section 194F of the Income Tax Act, 1961, mandates the deduction of TDS on payments made on account of repurchase of units by Mutual Fund or UTI. Non-compliance with the TDS provisions can result in interest, penalty, and disallowance of expenses. Therefore, it is advisable to comply with the TDS provisions to avoid any legal consequences.
