1) Who is responsible to deduct tax u/s 194LB?
Any person who makes payment of interest [which is payable by an infrastructure debt fund, as per section 10(47)] to non-resident (not a company/ foreign company) is required to deduct tax at source.
2) When to Deduct TDS under Section 194LB?
It will be deducted at the time of credit of such income to the account of the payee or at the time of payment of such sum in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier.
3) Rate of TDS under Section 194LB
The rate of TDS shall be 5% of such gross interest plus surcharge.
1. Surcharge shall be added if applicable.
2. Health & Education Cess @ 4% shall be added to the above rates plus surcharge if applicable.
3. The provisions of section 206AA shall not apply to a non-resident, not being a company, or to a foreign company, in respect of payment of such interest subject to such conditions as may be prescribed.
4) Is it possible to get the payment without Tax Deduction or with Lower Tax Deduction under this section?
Tax cannot be deducted at lower rate. Hence, section 197 shall not be applicable in this case.
Extract of Section 194LB of Income Tax Act, 1961
194LB. Where any income by way of interest is payable to a non-resident, not being a company, or to a foreign company, by an infrastructure debt fund referred to in clause (47) of section 10, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of five per cent.