TDS on Income from Units of a Business Trust (Section 194LBA)

A business trust shall be liable to deduct the tax at source, where any distributed income referred to in section 115UA, being of the nature referred to in:

1. section 10(23FC)(a) or

2. section 10(23FCA),

is payable by a business trust to its unit holder.

When is the tax to be deducted under section 194LBA?

Tax has to be deducted at the time of payment or credit whichever is earlier.

At what rate should the tax be deducted under section 194LBA ?

(1) Where distributed income is of the nature referred to in section 10(23FC)(a)

1. Where such distributed income is payable by a business trust to its unit holder being a resident — The rate of TDS shall be 10% of such distributed income.

No surcharge or education cess shall be added to the above rate.

2. Where such distributed income is payable by a business trust to its unit holder being a nonresident, not being a company or a foreign company — The rate of TDS shall be 5% of such distributed income.

Surcharge, wherever applicable plus education cess and SHEC shall be added to the above rates.

Note.—

1. The rate of TDS will be 20% in both the above cases, if PAN is not quoted by the deductee.

2. Tax cannot be deducted at lower rate. Hence, section 197 shall not be applicable in this case.

(2) Where distributed income is of the nature referred to in section 10(23FCA)

Where any distributed income referred to in section 115UA, being of the nature referred to in section 10(23FCA), is payable by a business trust to its unit holder, being a non-resident (not being a company), or a foreign company, the person responsible for making the payment shall at the time of credit of such payment to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.