Section 194LBC | TDS on Income in Respect of Investment in Securitization Trust

CA.R.S.KALRA | Last updated: 23 February 2021

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Section 194LBC outlines the Tax Deducted at Source (TDS) applicable to income received by investors from investments in securitisation trusts. The responsibility to deduct tax falls on the person making the payment to the investor. This deduction must occur at the earliest of when the income is credited to the investor's account or when the payment is actually made.

194LBC. (1) Where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, 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-

twenty-five per cent, if the payee is an individual or a Hindu undivided family;
thirty per cent, if the payee is any other

TDS on Securitisation Trust Investments: Section 194LBC

(2) Where any income is payable to an investor, being a non-resident (not being a company) or a foreign company, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, 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 rates in

Explanation .- For the purposes of this section,-

"investor" shall have the meaning assigned to it in clause ( a ) of the Explanation occurring after section 115TCA;
where any income as aforesaid is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be the credit of such income to the account of the payee, and the provisions of this section shall apply

1) Who is responsible to deduct tax u/s 194LBC?

Any person who gives income to an investor with respect to investment in securitization trust is required to deduct tax under this section.

2) When to Deduct TDS under Section 194LBC?

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).

3) Rate of TDS under Section 194LBC

25% (if the payee is resident Individual & HUF) (18.75% w.e.f. 14.05.2020 to 31.03.2021)
30% (if the payee is resident other than individual or HUF) (22.50% w.e.f. 14.05.2020 to 03.2021)

At the rates in force [if the payee is non-resident (not being a company) or foreign company]