A complete guide on Section 194F of the Income Tax Act

Introduction

Section 194F of the Income Tax Act earlier dealt with TDS on income arising from specified mutual fund and UTI repurchase payment transactions covered under Section 80CCB(2). The provision required specified entities to deduct tax at source on payments made towards the repurchase of certain units. However, an important change was introduced through the Union Budget 2024-25 and the Finance (No. 2) Bill, 2024.

The government omitted Section 194F to simplify the TDS framework applicable to mutual fund transactions. As a result, Section 194F was removed from the Income Tax Act with effect from 1st October 2024. Because of this omission, the Income Tax Act, 2025 does not contain any replacement or renamed provision for Section 194F under the new TDS structure.

In this blog, we will understand the meaning of Section 194F of the Income Tax Act, its applicability before omission, the impact of its removal, and the current tax treatment of mutual fund and UTI repurchase payment transactions.

What was Section 194F of Income Tax Act?

Section 194F of the Income Tax Act was a TDS provision applicable to income arising from mutual fund and UTI repurchase payment transactions. Before its omission, the section required specified entities to deduct TDS on payments made for repurchase of units under Section 80CCB(2).

The purpose of Section 194F was to require deduction of tax at source on payments made on repurchase of specified units covered under Section 80CCB(2) by Mutual Funds and the Unit Trust of India (UTI).

Key Details of Section 194F (Prior to 1st October 2024)

Why was Section 194F Removed?

The Union Budget 2024-25 and Finance (No. 2) Bill, 2024 proposed the omission of Section 194F of the Income Tax Act to simplify TDS compliance related to mutual fund and UTI repurchase payment transactions.

The amendment officially came into effect from 1st October 2024.

After this date:

• No TDS is required to be deducted under Section 194F of the Income Tax Act.
• Mutual fund repurchase transactions are no longer covered under this provision.
• The compliance burden on mutual funds and investors has reduced.

The government aimed to simplify taxation and remove overlapping TDS provisions from the Income Tax framework. Businesses and investors often seek professional Tax Consultancy Services to understand the impact of changing TDS provisions and compliance obligations.

Applicability of Section 194F Before Omission

Before its removal, Section 194F of the Income Tax Act was applied in the following situations:

• Repurchase of units by Mutual Funds
• UTI repurchase payment transactions
• Payments covered under Section 80CCB(2)
• Income distributed on specified repurchase transactions

The TDS under Section 194F had to be deducted at the time of payment or credit, whichever occurred earlier.

TDS Rate under Section 194F

Under Section 194F, the applicable TDS rate was 20% plus applicable surcharge and Health & Education cess on specified repurchase payments covered under Section 80CCB(2) for repurchase of mutual fund or UTI units. The deduction was applicable on income arising from mutual fund and UTI repurchase payment transactions covered under the provision.

Impact of Removal of Section 194F

The omission of Section 194F of the Income Tax Act introduced a major change in the taxation structure related to mutual fund repurchase transactions. Even after removal of TDS under Section 194F, investors may still have capital gains tax liability requiring proper Income Tax Return Filing.

Key Impact

• No TDS deduction on repurchase of mutual fund units after 1st October 2024
• Simplified compliance for investors
• Reduced TDS-related documentation
• Easier processing of mutual fund redemption transactions

This change mainly benefited investors and fund houses by reducing procedural compliance requirements.

Although Section 194F of the Income Tax Act has been omitted, investors should note that the removal of TDS does not eliminate their tax liability.

Any capital gains arising from the redemption of mutual fund units continue to be taxable in accordance with the applicable provisions of the Income Tax Act based on the type of scheme and the holding period.

Section 194F and Income Tax Act, 2025

The Income Tax Act, 2025 introduced a reorganized TDS structure where many old provisions were consolidated under new sections.

For example:

• Since Section 194F had already been omitted from the Income Tax Act before the implementation of the Income Tax Act, 2025, no corresponding replacement provision has been introduced under the new law.

However, Section 194F was not directly renamed or shifted into a new provision because it had already been omitted from the Income Tax Act from 1st October 2024. Businesses should also understand related provisions like TDS on Purchase of Goods under Section 393 for better compliance management.

Therefore:

• Section 194F of the Income Tax Act 1961 is no longer exists under the Income Tax Act, 2025
• There is no separate replacement provision for mutual fund and UTI repurchase payment TDS

Does TDS Apply on Mutual Fund Repurchase after 1st October 2024?

No. After the omission of Section 194F from 1st October 2024, there is currently no requirement to deduct TDS on mutual fund and UTI repurchase payment transactions under this provision.

However, the omission of TDS provisions does not affect the taxability of gains arising on redemption. Investors may still be liable to pay short-term or long-term capital gains tax depending on the type of mutual fund scheme and the applicable holding period.

How Ebizfiling Helps Businesses with TDS and Tax Compliance

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Our experts assist businesses with accurate TDS Return Filing, compliance tracking, reconciliation support, and timely reporting to reduce the chances of notices, mismatches, or penalty-related issues. We also help businesses understand changing TDS applicability, updated compliance procedures, and related tax obligations arising from amendments in the Income Tax framework.

With Ebizfiling, businesses can manage end-to-end tax compliance efficiently with professional support and timely compliance assistance.

Conclusion

Section 194F of the Income Tax Act earlier governed TDS on mutual fund and UTI repurchase payment transactions. Before its omission, the section required deduction of TDS at 20% plus applicable surcharge and Health & Education cess on specified repurchase payments covered under Section 80CCB(2).

However, through the Union Budget 2024-25 and Finance (No. 2) Bill, 2024, Section 194F was officially omitted with effect from 1st October 2024. Since the provision no longer exists, the Income Tax Act, 2025 does not provide any direct replacement or renamed section for Section 194F.

As a result, no TDS is currently deducted under Section 194F of the Income Tax Act on repurchase of mutual fund units, making the compliance process simpler for investors and financial institutions.

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