CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194LBC — Income from Investment in a Securitisation Trust (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Withholding counterpart of section 115TCA; unlitigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of income to an investor in a securitisation trust deducts tax at the specified rates (residents) or rates in force (non-residents), giving effect to the section 115TCA pass-through.
Litigation profile: None. A recent, specialised provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194LBC is the withholding counterpart of the securitisation-trust pass-through regime in section 115TCA (Chapter XII-EA, as recast). Where an income arises to an investor from an investment in a securitisation trust, the person responsible for paying it must deduct tax — at the rates specified for resident investors (historically 25% for individuals/HUF and 30% for others) and at the rates in force for non-resident investors. It gives effect to the principle that, after the 2016 recast, income of a securitisation trust is taxed in the investor's hands on a pass-through basis rather than at the trust level.
Pass-through to the investor
Section 115TCA made the securitisation trust a pass-through, so that income accruing to an investor is taxable in the investor's hands as if the investor had made the investment directly; section 194LBC withholds on that income at the point of payment/credit. The provision therefore depends on the section 115TCA characterisation and on the investor's residential status for the applicable rate.
Why authority is absent — candour
The recast securitisation regime is recent and specialised, and section 194LBC has generated no merits litigation. In candour, it is applied from its terms read with section 115TCA (and the related exemption in section 10(23DA)), and with the general default and treaty principles. The cognate development of the securitisation-trust taxation is traced in the Chapter XII-EA commentary.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194LBC. (1) Where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon, at the rate of ten per cent.
(2) Where any income is payable to an investor, being a non-resident (not being a company) or a foreign company, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon, at the rates in force.
Explanation.—For the purposes of this section,—
(a) "investor" shall have the meaning assigned to it in clause (a) of the Explanation occurring after section 115TCA;
(b) 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.
C. AUTHORITIES
Candour rule strictly observed: section 194LBC tracks the section 115TCA securitisation pass-through and has no direct authority. Only the statutory scheme is offered.
Statutory backdrop — the section 115TCA pass-through
Pass-through under section 115TCA (securitisation trusts)
Principle: After the 2016 recast, income of a securitisation trust is taxed in the investor's hands on a pass-through basis (section 115TCA); section 194LBC withholds on the investor's income at the specified rates (resident) or rates in force (non-resident).
Use: Locates what section 194LBC withholds against and the residence-based rate.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194LBC.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194LBC — Income from Investment in a Securitisation Trust (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Withholding counterpart of section 115TCA; unlitigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of income to an investor in a securitisation trust deducts tax at the specified rates (residents) or rates in force (non-residents), giving effect to the section 115TCA pass-through.
Litigation profile: None. A recent, specialised provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194LBC is the withholding counterpart of the securitisation-trust pass-through regime in section 115TCA (Chapter XII-EA, as recast). Where an income arises to an investor from an investment in a securitisation trust, the person responsible for paying it must deduct tax — at the rates specified for resident investors (historically 25% for individuals/HUF and 30% for others) and at the rates in force for non-resident investors. It gives effect to the principle that, after the 2016 recast, income of a securitisation trust is taxed in the investor's hands on a pass-through basis rather than at the trust level.
Pass-through to the investor
Section 115TCA made the securitisation trust a pass-through, so that income accruing to an investor is taxable in the investor's hands as if the investor had made the investment directly; section 194LBC withholds on that income at the point of payment/credit. The provision therefore depends on the section 115TCA characterisation and on the investor's residential status for the applicable rate.
Why authority is absent — candour
The recast securitisation regime is recent and specialised, and section 194LBC has generated no merits litigation. In candour, it is applied from its terms read with section 115TCA (and the related exemption in section 10(23DA)), and with the general default and treaty principles. The cognate development of the securitisation-trust taxation is traced in the Chapter XII-EA commentary.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194LBC. (1) Where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon, at the rate of ten per cent.
(2) Where any income is payable to an investor, being a non-resident (not being a company) or a foreign company, in respect of an investment in a securitisation trust specified in clause (d) of the Explanation occurring after section 115TCA, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon, at the rates in force.
Explanation.—For the purposes of this section,—
(a) "investor" shall have the meaning assigned to it in clause (a) of the Explanation occurring after section 115TCA;
(b) 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.
C. AUTHORITIES
Candour rule strictly observed: section 194LBC tracks the section 115TCA securitisation pass-through and has no direct authority. Only the statutory scheme is offered.
Statutory backdrop — the section 115TCA pass-through
Pass-through under section 115TCA (securitisation trusts)
Principle: After the 2016 recast, income of a securitisation trust is taxed in the investor's hands on a pass-through basis (section 115TCA); section 194LBC withholds on the investor's income at the specified rates (resident) or rates in force (non-resident).
Use: Locates what section 194LBC withholds against and the residence-based rate.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194LBC.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.