TDS under Section 194LB, 194LBA, 194LBB and 194LBC

Article covers TDS provisions under Section  under Section 194LB – Income by way of interest from Infrastructure Debt Fund,Section 194LBA – Certain Income from units of business trust, Section 194LBB – Income in respect of units of the investment fund and Section 194LBC – Income in respect of investment in securitization trust.

Section 194LB – Income by way of interest from Infrastructure Debt Fund

1. Conditions under which the provisions of section 194LB of the Income Tax Act, 1961 attracts –

If the following conditions are satisfied, then, the payer would be liable to deduct TDS –

• • The interest income is paid by an infrastructure debt fund referred to in section 10 (47); and
  • The interest income is paid to a non-resident (not being a company) or to a foreign company.

2. Time of deduction of TDS –

When the above listed conditions are satisfied, and the person is liable to deduct TDS under section 194LB, in that case, the TDS is to be deducted either at the time of credit of income to the account of the recipient or at the time of payment in cash or draft or cheque or any other mode, whichever is earlier.

3. Rate of TDS deduction –

TDS is deductible at the rate of 5%. Education cess and SHE cess is to be added to the base rate of 5%. Further, if the surcharge gets applicable, then, the same should also be added.

Section 194LBA – Certain Income from units of business trust –

Section 194LBA of the Income Tax Act, 1961 has been inserted with effect from 1^st October, 2014. The provisions of the same are explained hereunder –

• Section 10 (23FC)(a) –

Above section refers to any income of a business trust by way of interest received or receivable from a special purpose vehicle.

• Section 10 (23FCA) –

Above section refers to any income of a business trust (being a real estate investment trust) by way of renting / leasing / letting out any real estate asset owned directly by such business trust.

Section 194LBB – Income in respect of units of the investment fund –

Section 194LBB of the Income Tax Act, 1961 has been inserted with effect from 1^st June 2015. The provisions of the same are explained hereunder –

Coverage of Section 194LBB –

• A person making payment to a unit holder in respect of units of an investment fund specified in Explanation 1 clause (a) to section 115UB shall be liable to deduct TDS.
• However, the proportion of income, which is of the same nature as income referred to in section 10 (23FBB) shall be excluded from TDS deduction.

Please note that Explanation 1 clause (a) to section 115UB states that ‘investment fund’ means any fund established / incorporated in India in the form of trust / a company / a limited liability partnership / a body corporate which has been granted a registration certificate as Category I / Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012.

Time of deduction of TDS –

The Deductor is liable to deduct TDS either at the time of credit of income to the account of the payee or at the time of payment in cash or draft or cheque or any other mode, whichever is earlier.

Rate of TDS deduction –

TDS shall be deducted at following rates –

Section 194LBC – Income in respect of investment in securitization trust –

Section 194LBC of the Income Tax Act, 1961 has been inserted with effect from 1^st June 2016. The provisions of the same are explained hereunder –

Coverage of Section 194LBC –

A person making payment to an investor in respect of an investment in a securitization trust specified in Explanation (d) to section 115TCA is liable to deduct TDS.

Explanation (d) to section 115TCA provides a definition of ‘securitization trust’ which means trust, being a –

• ‘Special purpose distinct entity’ as defined in regulation 2 (1) clause (ii) of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations 2008; or
• ‘Special Purpose Vehicle’ as defined in and regulated by the guidelines on the securitization of standard assets issued by the Reserve Bank of India; or
• Trust set up by a securitization company or a reconstruction company formed for the purpose of the Securitization and Reconstruction of the Financial Asset and Enforcement of Security Interest Act, 2002 or in pursuance of any guidelines / directions issued for the said purposes by the Reserve Bank of India.

Time of deduction of TDS –

The Deductor is liable to deduct TDS either at the time of credit of income to the account of the payee or at the time of payment in cash or cheque or draft or any other mode, whichever is earlier.

Rate of TDS deduction –

TDS shall be deducted at following rates –

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