Section 194L
An Overview of Section 194L Series
In this post, we will discuss key sections of the Income Tax Act related to TDS on different payments under section 194L series. From compensation for land acquisitions under Section 194LA to interest payments to foreign investors under Section 194LD, we will cover the main provisions, rates, and situations where TDS applies, making it easier to understand when and how to deduct TDS.
Let’s look at each section:
- Section 194LA: TDS on Payment of Compensation on Acquisition of Certain Immovable Property
- Section 194LB: TDS on Income by way of Interest from Infrastructure Debt Fund
- Section 194LBA: TDS on Certain Income from Units of a Business Trust
- Section 194LBB: TDS on Income in Respect of Units of Investment Fund
- Section 194LBC: TDS on Income in Respect of Investment in Securitisation Trust
- Section 194LC: TDS on Income by way of Interest from Indian Company or Business trust
- Section 194LD: TDS on Income by way of Interest on Certain Bonds and Government Securities
- FAQs
Section 194LA: TDS on Payment of Compensation on Acquisition of Certain Immovable Property
Who needs to deduct TDS under section 194LA?
Anyone who pays compensation or enhanced compensation to a resident for the compulsory acquisition of immovable property (excluding agricultural land) must deduct tax at source.
What is the rate and time for TDS deduction under section 194LA?
The TDS rate is 10%, and the deduction should be made at the time of payment.
Exceptions where TDS is not required:
- If the total payment for the year does not exceed ₹2,50,000.
- If the payment is made under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013.
Section 194LB: TDS on Income by way of Interest from Infrastructure Debt Fund
Who needs to deduct TDS under Section 194LB?
Any person who pays interest (from an infrastructure debt fund under section 10(47)) to a non-resident (other than a foreign company) must deduct TDS.
What is the rate and time for TDS deduction under Section 194LB?
The TDS rate is 5% (with applicable EC & SHEC), which should be deducted when making the payment.
Section 194LBA: TDS on Certain Income from Units of a Business Trust
Who needs to deduct TDS under Section 194LBA?
Anyone making income payments (as per Section 115UA) from a business trust to its unit holder must deduct tax at source. The unit holder can be a resident or a non-resident (excluding companies).
What is the rate and time for TDS deduction under Section 194LBA?
- Rate of tax: 10% for residents and 5% for non-residents.
- Time of deduction: TDS should be deducted when the income is either credited to the payee’s account or paid (in cash, cheque, draft, or any other mode), whichever comes first.
Section 194LBB: TDS on Income in Respect of Units of Investment Fund
Who needs to deduct TDS under Section 194LBB?
Anyone who distributes income (as referred to under Section 115UB) to an unit holder from an investment trust must deduct TDS under this section.
What is the rate and time of tax deduction under Section 194LBB?
- Rate: 10% if the payee is a resident. For non-residents or foreign companies, the tax is based on the applicable rates for that financial year.
- Time of deduction: TDS is deducted at the earlier of two events—when the income is credited to the payee’s account or when it is actually paid (by cash, cheque, draft, or other means).
Section 194LBC: TDS on Income in Respect of Investment in Securitisation Trust
Who needs to deduct TDS under section 194LBC?
Anyone who pays income to an investor from an investment in a securitisation trust must deduct tax under this section.
What is the TDS rate and when should it be deducted under section 194LBC?
- For resident individuals & HUFs: 25%
- For other residents: 30%
- For non-residents or foreign companies: As per applicable rates
TDS should be deducted at the earlier of:
- When the income is credited to the investor’s account or
- When the payment is made (by cash, cheque, draft, etc.).
Section 194LC: TDS on Income by way of Interest from Indian Company or Business trust
Who needs to deduct TDS under Section 194LC?
Indian companies or business trusts must deduct TDS when paying interest to a non-resident (other than a company) or a foreign company.
When is TDS deducted?
TDS is deducted on interest payments for money borrowed from sources outside India by issuing rupee-denominated bonds.
What is the TDS rate, and when should it be deducted?
The TDS rate under Section 194LC is 5% plus 4% Health & Education Cess. The deduction should be made earlier in these two events: when the interest is credited to the payee’s account or when the actual payment is made (in cash, cheque, draft, or any other mode).
Section 194LD: TDS on Income by way of Interest on Certain Bonds and Government Securities
Who needs to deduct TDS u/s 194LD?If you pay interest to a Foreign Institutional Investor (FII) or a Qualified Foreign Investor (QFB), you must deduct tax at source.
Interest on which TDS is to be deducted?
You need to deduct TDS on interest from investments in Indian rupee-denominated bonds (between 01/06/2013 and 01/07/2023) or municipal debt securities. (between 01/04/2020 and 01/07/2023)
What is the rate & time of tax deduction u/s 194LD?
Rate: 5% plus 4% Health & Education Cess.
Timing: Deduct tax when the interest is credited to the payee’s account or when it’s actually paid, whichever comes first.
We have reached the end of this post. Please share your queries with us in the comment section below.
FAQs
1. Is TDS applied to compensation?
Ans: Yes, Section 194LA allows for a tax deduction on compensation for purchasing certain immovable property (except agricultural land).
2. What is a compulsory acquisition?
Ans: Compulsory acquisition refers to the government’s ability to acquire land from its owner without the owner’s willing permission to benefit society.
3. How is TDS calculated on bill amounts?
Ans: TDS is not deducted from the GST component of an invoice. TDS is deducted from the amount excluding GST.
4. How is the TDS on professional fees calculated?
Ans: TDS on professional fees is handled by Section 194J. If professional fees exceed Rs 30000, TDS is deducted at 10%.
