Union Budget 2024: 20% TDS on repurchase by mutual funds and UTI withdrawn

Finance Minister Nirmala Sitharaman on Tuesday announced that 20% TDS rate on repurchase by mutual funds and UTI has been withdrawn.

According to the Finance Bill, 2024, the Clause 55 of the Bill seeks to omit section 194F of the Income-tax Act relating to payments on account of repurchase of units by Mutual Fund or Unit Trust of India (UTI).

The bill further mentioned that the said section provides that the person responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent (20%). It is proposed to omit the said section 194F. This amendment will take effect from October 1, 2024.


Adhil Shetty, CEO of Bankbazaar.com, says, this has been done as a part of the provisions contained in the Finance Bill, 2024, which seeks to omit Section 194F of the Income-tax Act. Clause 55 of the Finance Bill, 2024, read with its First Schedule, however, proposes to omit Section 194F, which imposes a 20% TDS obligation in case of payments for repurchase of mutual fund units or units of the UTI.

"The said sub-section provides that in the case of such payment, the person responsible for making it shall, at the time of payment, deduct income tax thereon at 20% only if the amount of payment, or as the case may be, the aggregate amount of such payments, made during any previous year exceeds Rs. 1 lakh. The new amendment would remove this requirement, reducing the tax burden on mutual fund investors. This announcement could be seen as a relief for mutual fund investors," he stated.

“The withdrawal of the 20% TDS rate on mutual fund unit repurchase marks a step towards easing the tax burden for investors. This aligns with the overall budget's focus on inclusive growth, employment generation, and infrastructure development, aimed at creating ample opportunities and fostering a resilient economy,” said Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited

"The removal of 20% TDS on the repurchase of units by mutual funds and UTI under section 194 is a welcome step. In this budget, the Government has attempted to simplify and rationalize the tax structures," commented Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance

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