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.
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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 1st October, 2014. The provisions of the same are explained hereunder –
The Income covered under section 194LBA | Time of TDS deduction | Rate of TDS deduction |
A business trust is liable to deduct TDS, where any distributed income referred to in section 115UA, being of a nature referred to in section 10 (23FC)(a) or section 10 (23FCA) is payable by the business trust to its unit holders being a resident. | Earlier of the following –
|
10% |
A business trust is liable to deduct TDS, where any distributed income referred to in section 115UA, being of a nature referred to in section 10 (23FC)(a) is payable by the business trust to its unit holders being a non-resident (not being a company) or the foreign company. | Earlier of the following –
|
5% |
A business trust is liable to deduct TDS, where any distributed income referred to in section 115UA, being of a nature referred to in section 10 (23FCA) is payable by the business trust to its unit holders being a non-resident (not being a company) or the foreign company. | Earlier of the following –
|
30% |
- 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 1st 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 –
Rate of TDS | Residential status of the Payee |
10% | Resident |
30% | Non-resident (not being a company) or a foreign company |
Section 194LBC – Income in respect of investment in securitization trust –
Section 194LBC of the Income Tax Act, 1961 has been inserted with effect from 1st 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 –
Particulars | Rate of TDS |
Where the payee is an individual or a HUF | 25% |
Any other person | 30% |
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Thanks for sharing this article. I have a question on this. Suppose I have made an investment in a Private Fund that has been deducting TDS on the income they allocated to me for the last three years. Now, I would like to transfer my commitment to a friend who is an NRI. So far, the Fund has not distributed any income to me. They have been allocating the income each year and depositing TDS in my name. If I transfer the Fund, all my income will be distributed to my NRI friend. In this case, should he be paying any tax on the income when it is distributed to him as his TDS rates are different? And how will he do the calculation as I already paid TDS on the income. Could you please advice along with reference of applicable laws. Thanks, Manjul
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Thanks for the Article. I have made investment in REIT’s and certail interest income under 194LBA they are not deductoing Tax ( saying exempt from tax). My question is that interest amount is to be included in the taxable income?,. please clarify