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

Who is responsible to deduct tax under section 194LBA?

An individual who makes payment of income according to the section 115UA which is payable by a business trust to their unit holder is needed to deduct tax at source. This kind of unit holder can be a non-resident or resident (but not a company).

When to Deduct TDS under Section 194LBA?

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

What is the Rate of TDS under Section 194LBA?

ParticularsRate
Distribution of dividend income (with effect from 01 April 2020) & income referred under section 10(23FC) & 10(23FCA) to resident10%(7.5% with effect from 14 May 2020 to 31 March 2021)
Distribution of dividend income (with effect from 01 April 2020) & income referred under section 10(23FC)(a) to non-resident5%
Distribution of income referred under section 10(23FC)(b) to non- resident10%
Distribution of income referred under section 10(23FCA) to non-residentRates in Force

Extract of Income Tax Act, 1961- Section 194LBA

(1) A business trust is responsible for TDS deduction, 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 their unit holders being a resident. The person responsible for making the payment will at the time of credit of such payment to payee’s account or at the time of payment thereof in cash or by the issuing cheque or demand draft or by any other payment mode, whichever is earlier, deduct income-tax thereon at the rate of 10%.

(2) A business trust is responsible to deduct tax deducted at source, 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 their unit holders being a non-resident (not being a company) or the foreign company. The person responsible for making the payment shall at the time of credit of this kind of payment to the payee’s account or at the time of payment thereof in cash or other mode of payment, whatever is earlier, deduct income-tax thereon at the rate of 5% 59[in case of income of the nature referred to in sub-clause (a) and 10% in case of income of the nature referred to in sub-clause (b), of the said clause].

59[(2A) Nothing contained in sub-sections (1) & sub-sections (2) will apply in respect of income of the nature related to in sub-clause (b) of clause (23FC) of section 10, if the special purpose vehicle referred to in the said clause has not utilized the option under section 115BAA.]

(3) A business trust is responsible to deduct tax deducted at source(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 their unit holders being a non-resident (not being a company) or the foreign company. The person liable for making the payment will at the time of credit of such payment to the payee’s account or at the time of payment thereof in cash or by the cheque or demand draft or by any other payment method, whatever is earlier, deduct income tax thereupon at the rates in force.

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