Section 194LBC: TDS on Income from Investment in Securitisation Trust
Section 194LBC of the Income-tax Act, 1961 dealt with deduction of tax at source on income payable to an investor in respect of an investment in a securitisation trust. From 1 April 2026, current TDS obligations are governed by the Income Tax Act, 2025, principally Section 393 for non-salary payments.
Section 194LBC at a glance
| Point | Position |
|---|---|
| Nature of payment | Income in respect of investment in a securitisation trust |
| Resident investor under Section 194LBC | TDS at 10% for the provision as applicable from 1 April 2025 up to the transition to the 2025 Act |
| Non-resident investor under Section 194LBC | TDS at the rates in force |
| Time of deduction | At the time of credit or payment, whichever is earlier |
| Corresponding current provision | Section 393 of the Income Tax Act, 2025; resident securitisation-trust income is in Section 393(1), Table Sl. No. 4(iv) |
| Current resident rate | 10% |
| Current resident threshold | Nil |
What did Section 194LBC provide?
Section 194LBC applied where income was payable to an investor in respect of an investment in a securitisation trust. The payer was required to deduct income-tax when the income was credited to the payee or when it was paid, whichever occurred earlier.
For a resident investor, the rate under Section 194LBC was rationalised to a uniform 10% with effect from 1 April 2025. Before that amendment, the provision prescribed separate resident rates of 25% for an individual or Hindu undivided family and 30% for other resident persons. For a non-resident other than a company or for a foreign company, Section 194LBC required deduction at the rates in force.
Meaning of investor and securitisation trust
Under the 1961 Act framework, Section 194LBC referred to the definitions associated with Section 115TCA. An investor broadly meant a holder of a securitised debt instrument, securities or a security receipt issued by a securitisation trust. Section 115TCA provided the pass-through framework under which income arising from investments made by a securitisation trust was taxable in the hands of the investor in the same manner as if the investor had made the underlying investments directly.
Under the Income Tax Act, 2025, the corresponding special provision is Section 221. It continues the pass-through approach for income of investors in a securitisation trust and contains the relevant definitions of investor and securitisation trust.
Current provision under Income Tax Act, 2025
For Tax Year 2026-27 onwards, Section 393 consolidates TDS provisions for non-salary payments. For a resident investor, Section 393(1), Table Sl. No. 4(iv) covers income in respect of an investment in a securitisation trust specified in Section 221. The payer is the securitisation trust, the TDS rate is 10%, and there is no monetary threshold.
For a non-resident investor other than a company or for a foreign company, the corresponding non-resident table under Section 393 covers income in respect of an investment in a securitisation trust specified in Section 221 and applies the rates in force.
When is TDS deducted?
The withholding obligation is linked to the earlier of credit or payment. A credit to a suspense account or another account in the payer's books can also be treated as credit to the payee for TDS purposes where the statutory deeming rule applies.
Example
Resident investor: If a securitisation trust credits Rs. 1,00,000 of covered income to a resident investor during Tax Year 2026-27, Section 393(1), Table Sl. No. 4(iv) applies. With a 10% rate and nil threshold, the basic TDS amount is Rs. 10,000, subject to other provisions of the Act that may affect deduction in the particular case.
Official references
- Income Tax Department - Income Tax Act, 2025
- Income Tax Department - TDS Compliance and transition guidance
- India Code - Central legislation
This page is an informational guide. The applicable rate, treaty position, surcharge, cess, lower-deduction certificate, PAN-related provisions and other statutory conditions should be checked for the facts and tax year concerned.