The Finance Minister Nirmala Sitharaman presented the Union Budget 2025 on February 1st, 2025 at 11:00 AM before the Parliament. The FM proposed to cut down the TDS rate on Securitization Trust Investments to 10%.
Section 194LBC of the Act requires that where any income is payable by a securitisation trust to an investor, being a resident, in respect of an investment in a securitisation trust as specified therein, the person responsible for making the payment shall, deduct income-tax, at the rate of 25%, if the payee is an individual or a Hindu undivided family and 30%, if the payee is any other person.
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It is proposed that TDS rate under section 194LBC of the Act be reduced from 25% and 30% to 10% as this sector is sufficiently organized and regulated.This amendment will take effect from the 1st day of April 2025.
A lower, consistent TDS rate will increase liquidity and decrease tax outflows in the securitization and Alternative Investment Fund (AIF) sectors, which are now well-regulated.
The proposed adjustment will result in smaller upfront tax deductions for investors in securitized debt instruments and AIFs. Another factor is improved cash flow; when TDS outflow is decreased, investors will have more liquidity. For financial institutions, tax deductions are made easier with a standard rate.
Facilitating business in the financial industry and increasing investment in the securitization market are the goals of this reform.
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