Payment to Debenture Trustee

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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2010 Dear sir,

Please advice whether payment made to debenture trustee is liable for deduction of tax.

srinath

srinath (Expert)
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27 July 2010 ya it would be liable for TDS

Querist : Anonymous

Querist : Anonymous (Querist)

29 July 2010 Please reply in details if TDS is applicable then it will be deducted under which section.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 When making payments to a debenture trustee, it’s important to determine whether TDS (Tax Deducted at Source) is applicable and under which section. Here’s a detailed explanation:

### **Understanding the Role of Debenture Trustees**

A debenture trustee is appointed to oversee the interests of debenture holders and ensure that the issuer adheres to the terms of the debenture agreement. The payment made to a debenture trustee can include fees for their services, which might be subject to TDS.

### **Applicability of TDS on Payments to Debenture Trustees**

1. **Nature of Payment:**
- **Fees for Services:** If the payment to the debenture trustee is for their professional services, such as management or advisory services, it is generally considered as "fees for professional or technical services."

2. **Relevant TDS Sections:**

- **Section 194J:**
- **Applicability:** TDS under Section 194J applies to fees for professional or technical services. If the payment to the debenture trustee is categorized as professional fees, then TDS at the rate specified under this section would be applicable.
- **Rate:** The TDS rate under Section 194J is generally 10% (as per the Finance Act, 2024), but this may vary depending on the nature of services and applicable provisions.

- **Section 194H:**
- **Applicability:** If the payment is considered as a commission or brokerage, TDS under Section 194H might apply. This is less common for debenture trustee fees but should be considered based on the nature of the payment.
- **Rate:** The TDS rate under Section 194H is typically 5%.

3. **Documentation and Compliance:**
- **Form 16A:** Ensure that TDS is deducted and deposited with the government. Issue Form 16A to the debenture trustee to provide evidence of TDS deduction.
- **TDS Return:** File TDS returns quarterly to report the TDS deducted.

### **Steps to Determine TDS Applicability:**

1. **Review the Nature of Payment:**
- Verify if the payment to the debenture trustee is for professional or technical services or other types of services.

2. **Determine the Appropriate Section:**
- If it’s for professional services, Section 194J is applicable.
- If it’s for commission or brokerage, Section 194H could be relevant.

3. **Deduct TDS Accordingly:**
- Apply the appropriate rate based on the nature of the payment and the relevant TDS section.

4. **Compliance:**
- Deduct TDS at the time of payment.
- Deposit the TDS with the government within the prescribed due dates.
- Issue Form 16A to the debenture trustee for their records.

### **Summary**

- **TDS Applicability:** Payments to a debenture trustee for professional services typically fall under Section 194J.
- **Rate:** The standard rate for Section 194J is 10% (subject to any changes as per the Finance Act).
- **Documentation:** Ensure compliance with TDS provisions, including deduction, deposit, and issuance of Form 16A.

For specific cases or complex transactions, consulting with a tax professional or legal advisor can provide tailored guidance and ensure all regulatory requirements are met accurately.