Finance Bill, 2025, proposes amendments to simplify Tax Deduction at Source (TDS) provisions, focusing on better compliance and ease of doing business. One significant change is the rationalization of TDS rates under Section 194LBC, which applies to income payable by securitisation trusts to resident investors. Currently, the TDS rate is 25% for individuals and Hindu undivided families (HUFs) and 30% for other entities. The proposed amendment seeks to introduce a uniform TDS rate of 10% for all categories of payees, reflecting the sector’s organized and regulated nature. This change aims to create uniformity and reduce the compliance burden for investors and trusts. The amendment will take effect from April 1, 2025, simplifying tax deductions and improving the operational landscape for securitisation trusts.
Budget 2025: TDS rate reduction for section 194LBC
Section 194LBC of the Act requires that where any income is payable by a securitisation trust to an investor, being a resident, in respect of an investment in a securitisation trust as specified therein, the person responsible for making the payment shall, deduct income-tax, at the rate of 25%, if the payee is an individual or a Hindu undivided family and 30%, if the payee is any other person.
2. It is proposed that TDS rate under section 194LBC of the Act be reduced from 25% and 30% to 10% as this sector is sufficiently organized and regulated.
3. This amendment will take effect from the 1st day of April 2025.
[Clause 63]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 63 of the Bill seeks to amend section 194LBC of the Income-tax Act relating to income in respect of investment in securitisation trust.
The said section, inter alia, provides that where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust as specified therein, the person responsible for making the payment shall, deduct income-tax, at the rate of 25%, if the payee is an individual or a Hindu undivided family and 30%, if the payee is any other person.
It is proposed to amend the said section so as to provide a reduced uniform rate of tax deducted at source of 10%, instead of the two rates specified above.
This amendment will take effect from 1st April, 2025.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
63. Amendment of section 194LBC.
In section 194LBC of the Income-tax Act, in subsection (1), for the portion beginning with the words “at the rate of” and ending with the words “payee is any other person”, the words “at the rate of ten per cent.” shall be substituted.
