Section 115TA and 115TB: Tax on Securitisation Trust Distributions and Interest for Delayed Tax

Sections 115TA and 115TB formed part of the special tax regime for income distributed by securitisation trusts under the Income-tax Act, 1961. Their practical operation is now mainly historical. Section 115TA itself provided that it would not apply to income distributed by a securitisation trust to investors on or after 1 June 2016.

What was Section 115TA of the Income-tax Act, 1961?

Section 115TA was titled "Tax on distributed income to investors". It created an additional income-tax liability for a securitisation trust when it distributed income to its investors. The provision operated notwithstanding other provisions of the 1961 Act.

Under the historical regime, distributed income was taxed at 25% where the investor was an individual or Hindu undivided family and at 30% where the investor was any other person. The provision did not apply where the recipient's income, irrespective of its nature and source, was not chargeable to tax under the Act.

The person responsible for making the distribution was required to pay the tax to the credit of the Central Government within 14 days from the date of distribution or payment, whichever was earlier. No deduction was allowed to the securitisation trust for income that had already been charged under Section 115TA(1).

What was Section 115TB of the Income-tax Act, 1961?

Section 115TB was titled "Interest payable for non-payment of tax". It applied where the person responsible for paying distributed income, or the securitisation trust, failed to pay all or part of the tax referred to in Section 115TA(1) within the time allowed by Section 115TA(2).

The consequence was simple interest at 1% for every month or part of a month on the unpaid tax. The interest period began immediately after the last date on which the tax was payable and ended on the date on which the tax was actually paid.

Historical effect of Sections 115TA and 115TB

Current law for securitisation trusts from 1 April 2026

The Income-tax Act, 2025 is the operative central income-tax statute from 1 April 2026. Its Section 221 provides the current pass-through framework for income from securitisation trusts. Income accruing, arising or received by an investor out of investments made by the securitisation trust is taxable in the investor's hands in the same manner as if the investor had made the underlying investment directly.

Section 221 also preserves the nature and proportion of the underlying income in the investor's hands and contains rules for income that accrues but is not paid or credited during the tax year. It defines "investor" and "securitisation trust" for this framework.

For a resident investor, Section 393(1), Table, serial number 4(iv) of the Income-tax Act, 2025 requires tax deduction at source at 10% on income in respect of an investment in a securitisation trust specified in Section 221, with no threshold stated for that entry. For a non-resident investor or foreign company, Section 393(2), Table, serial number 9 provides for deduction at the rates in force.

Meaning of investor under current Section 221

For Section 221, an "investor" is a person who holds a securitised debt instrument, securities or a security receipt issued by the securitisation trust. Section 221 also defines the categories of trusts that qualify as a "securitisation trust", including specified entities regulated under the applicable SEBI, RBI and SARFAESI frameworks, subject to statutory conditions.

Official Income Tax resources

This page explains the statutory framework for general legal and tax information. For a transaction-specific position, the applicable tax year, transition provisions, investor status, nature of income and relevant rules should be checked.