Budget 2023 proposed to allow a taxpayer to obtain a certificate of Tax Deduction Source (TDS) to lower or ‘nil rate’ on sums on which tax is required to be deducted under section 194LBA of the Income Tax Act, 1961 by Business Trusts.
The bill proposed to insert the provision 194LBA into the section 197 of Income Tax Act which states about the certificate for deduction at lower rate.
The taxability of Income on Business Trust is mentioned in the section 115UA of Income Tax Act. According to the provision, the distributed income shall be subjected to tax at the maximum marginal rate.
As per section 194LBA of the Income Tax Act, on certain income from units of business trust, the payer is required to deduct income tax at a rate of 10% at the moment the payment is credited to the payee’s account, made in cash, by issuing a check or drafts, or made in any other manner, depending on which occurs first. Further for a non-resident company, shall deduct 5% of tax.
The section 197 of the Income Tax Act states the eligibility for certificate for deduction at lower rate.
It was suggested to amend Section 197, Subsection (1) of the Income Tax Act to specify that amounts for which tax withholding is required under Section 194LBA of the Income Tax Act shall also be eligible for certificate for deduction at lower rate.
The Finance Bill of 2023 clearly mentioned the amendment of section 197 of Income Tax Act in which it was posited to insert the section 194LBA. In line with sub -section (2) of section 197, once such a certificate has been issued, the person in charge of paying the income is required to withhold income tax at the rates specified in the certificate, or not withhold any tax, depending on the circumstances, up until the Assessing Officer nullifies the certificate.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
