TDS on Income in respect of Units of Investment Fund (Section 194LBB)
The person responsible for making the payment of any income other than that proportion of income which is of the same nature as income referred to in section 10(23FBB) , to a unit holder in respect of units of an investment fund specified in clause (a) of the Explanation 1 to Section 115UB shall deduct the tax at source.
When is the tax to be deducted under section 194LBB?
The tax shall be deducted at the time of payment or credit whichever is earlier.
Rate of TDS under section 194LBB
(a) Where such income is payable by an investment fund to its unit holder being a resident —
The rate of TDS shall be 10% of such income.
No surcharge or education cess shall be added to the above rate.
The rate of TDS will be 20% in the above case, if PAN is not quoted by the deductee.
Tax cannot be deducted at lower rate. Hence, section 197 shall not be applicable in this case.
(b) Where such income is payable by an investment fund to its unit holder being a non-resident, not being a company or a foreign company —
at the rate inforce.
Surcharge, wherever applicable plus education cess and SHEC shall be added to the above rate.
Explanation.—For the purposes of this section,—
“unit” shall have the meaning assigned to it in clause (c) of the Explanation 1 to section 115UB; “unit” means beneficial interest of an investor in the investment fund or a scheme of the investment fund and shall include shares or partnership interests. [Clause (c) of the Explanation 1 to section 115UB]
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 accordingly.
Meaning of investment fund [Clause (a) of Explanation 1 to section 115UB]:
“Investment fund” means any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or a Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992.
Income referred to in section 10(23FBB):
It means any income referred to in section 115UB, accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession".
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