1) Who is responsible to deduct tax under section 194LBA of Income Tax Act, 1961?

Any person who makes payment of income [as per section 115UA] which is payable by a business trust to its unit holder is required to deduct tax at source. Such unit holder can be a resident, non-resident (but not a company).

2) When to Deduct TDS under Section 194LBA?

The time of deduction is earlier of, the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or another mode).

TDS on Certain Income from Units of a Business Trust

3) Rate of TDS under Section 194LBA

S.No. Particulars Rate
1. Distribution of dividend income (w.e.f.01.04.2020) & income referred u/s 10(23FC) & 10(23FCA)  to resident 10%(7.5% w.e.f. 14.05.2020 to 31.03.2021)
2. Distribution of dividend income (w.e.f. 01.04.2020) &  income referred u/s 10(23FC)(a) to non-resident 5%
3. Distribution of income referred u/s 10(23FC)(b) to non-resident 10%
4. Distribution of income referred u/s 10(23FCA) to non-resident Rates in Force

Extract of Section 194LBA of Income Tax Act, 1961

Section 194LBA TDS on Certain Income from Units of a Business Trust

194LBA. (1) Where any distributed income referred to in section 115UA, being of the nature referred to in [***] clause (23FC) or clause (23FCA) of section 10, is payable by a business trust to its unit holder being a resident, the person responsible for making the payment shall at the time of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.

(2) Where any distributed income referred to in section 115UA, being of the nature referred to in [***] clause (23FC) of section 10, is payable by a business trust to its unit holder, being a non-resident (not being a company) or a foreign company, the person responsible for making the payment shall at the time of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the 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 89[in case of income of the nature referred to in sub-clause (a) and ten per cent in case of income of the nature referred to in sub-clause (b), of the said clause]. [(2A) Nothing contained in sub-sections (1) and (2) shall apply in respect of income of the nature referred to in sub-clause (b) of clause (23FC) of section 10, if the special purpose vehicle referred to in the said clause has not exercised the option under section 115BAA.]

(2) Where any distributed income referred to in section 115UA, being of the nature referred to in clause (23FCA) of section 10, is payable by a business trust to its unit holder, being a non-resident (not being a company), or a foreign company, the person responsible for making the payment shall at the time of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.

 (Republished with amendments)

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