Introduction
Section 194LBC was introduced by Finance Act, 2016 with effective from June 1, 2016.
It applies to securitization trusts, which pool funds and distribute income to investors.
Investor
Any individual, HUF, company, or non-resident investing in a securitization trust.
Securitization Trust
Defined u/s 115TCA which has been approved by RBI or SEBI for securitization purposes.
Purpose
- To ensures TDS deduction on income distributed by securitization trusts for tax transparency.
- To prevents tax evasion by deducting tax at the source.
- To ensures timely tax collection from both resident and non-resident investors.
Who is Liable to Deduct Tax?
The person responsible for making the payment to an investor in respect of an investment in a securitization trust being referred in Section 115TCA is responsible for deducting TDS before making any payment to the investor.
When to Deducted?
At the time of payment or crediting the payee, whichever is earlier.
TDS Rates
| Category | Current Rates | Proposed Rates |
| Resident | Individual or HUF – 25% Other Resident (Companies, Firms, AOPs) – 30% | Individual or HUF – 10% Other Resident (Companies, Firms, AOPs) – 10% |
| Non-Resident | Foreign Company – 30% Other than Foreign Company – 40% | No Changes |
Note
As per Budget 2025, it is proposed that TDS rate u/s 194LBC of the Act be reduced from 25% and 30% to 10% as this sector is sufficiently organized and regulated.
This amendment will take effect from the 1st day of April 2025.
TDS Compliance Requirements
When To Deposit?
The deducted amount must be deposited with the government within 7th day of the following month.
Who is required to issue TDS Certificate?
The payer is required to issue a TDS certificate to the payee as it serves as proof of tax deduction and payee can use it to claim credit while filing their ITR.
Where To Report?
The deducted amount made u/s 194LBC must be reported in:
- Form 26Q (Residents).
- Form 27Q (Non-residents).
Deadlines To File Form 26Q and 27Q
The deadlines for filing these forms are:
| Month | Due Date |
| Quarter 1 (April-June) | 31st July |
| Quarter 2 (July-September) | 31st October |
| Quarter 3 (October-December) | 31st January |
| Quarter 4 (January-March) | 31st May |
Once filed, investors can track TDS deductions through their Form 26AS or by obtaining a TDS certificate from the payer.
FAQs
Securitization trust refers to a trust that has been set up for the purpose of securitization and approved by the relevant regulatory authority, such as the RBI or the SEBI.
Non-compliance may lead to:
Interest penalties on delayed TDS payments
Fines for late filing of TDS returns
Investors receive income after TDS deduction and can claim a tax credit while filing their ITR.
Yes, if the total tax liability is lower than the TDS deducted, the investor can claim a refund while filing the income tax return.