Section 115TA: Tax on Distributed Income to Investors
Section 115TA established a special additional income-tax on income distributed by securitisation trusts to investors. Its practical application is now historical because distributions made on or after 1 June 2016 are expressly excluded.
Meaning and scope of Section 115TA
Chapter XII-EA introduced special provisions for securitisation trusts. A securitisation trust is a qualifying trust within the statutory definition associated with these provisions; an investor is a person holding the relevant investment interest in that trust. The applicable definitions and qualifications should be checked in the Act, including the Explanation associated with Section 115TCA.
Historically, Section 115TA imposed an additional income-tax obligation on the securitisation trust itself when it distributed income, rather than treating that distribution as ordinary taxable income in the hands of the investor under the present pass-through framework.
Section 115TA(1): Historical rates of distribution tax
For distributions to which the former regime applied, Section 115TA(1) prescribed the following additional income-tax rates:
| Investor category | Statutory rate |
|---|---|
| Individual or Hindu undivided family (HUF) | 25% |
| Any other person | 30% |
The proviso excluded distributions to a person whose income, irrespective of its nature and source, was not chargeable to tax under the Act. These are historical distribution-tax rates, not rates to be applied to distributions made on or after 1 June 2016.
Section 115TA(2): Payment deadline
The person responsible for making the distribution was required to pay the tax to the credit of the Central Government within 14 days from the date of distribution or payment, whichever occurred earlier. This requirement relates to the former Section 115TA distribution-tax regime.
Section 115TA(3): Omitted provision
Sub-section (3) was omitted by the Finance (No. 2) Act, 2014, with effect from 1 April 2015. It should not be presented as an operative requirement.
Section 115TA(4): No deduction for taxed income
Where income was charged to additional income-tax under Section 115TA(1), the securitisation trust could not claim a deduction under another provision of the Act in respect of that income.
Section 115TA(5): Cessation from 1 June 2016
Inserted by the Finance Act, 2016, sub-section (5) expressly states that Section 115TA does not apply to income distributed by a securitisation trust to investors on or after 1 June 2016. Accordingly, the 25% and 30% rates above should not be used as a current distribution-tax calculation for later payments.
Tax treatment following the 2016 change
Under Section 115TCA, income accruing, arising or received by an investor from investments made through a qualifying securitisation trust is generally taxable as if the investor had made the underlying investments directly. The character and proportion of the income are preserved in the investor's hands, and the provision also addresses amounts not actually distributed during the year.
Section 194LBC provides for tax deduction at source on specified income payable to investors of securitisation trusts. The applicable rate and any relief or certificate must be assessed under the law relevant to the payment and investor. Do not confuse withholding tax under Section 194LBC with the former additional distribution tax under Section 115TA.
Likewise, the exemption formerly provided under Section 10(35A) does not extend to the relevant income received on or after 1 June 2016.
Related statutory provisions
- Section 115TB: Interest for delayed payment of the former distribution tax.
- Section 115TC: Consequences of default in payment under the former regime.
- Section 115TCA: Taxation of income from securitisation trusts in investors' hands.
- Section 194LBC: Tax deduction at source on specified income from securitisation trusts.
- Section 10(35A): Earlier exemption for certain distributed income, subject to its statutory cutoff.
Legislative history
Section 115TA was inserted by the Finance Act, 2013 with effect from 1 June 2013. Sub-section (3) was omitted with effect from 1 April 2015. The Finance Act, 2016 inserted sub-section (5), ending the operation of Section 115TA for distributions from 1 June 2016. The revised investor-level taxation framework was introduced through the 2016 amendments.
Official legislation and guidance
- Income Tax Department: Section 115TA (2025 text)
- Income Tax Department: Section 115TCA
- CBDT Circular No. 3/2017: Explanatory notes on Finance Act, 2016
- Income Tax Department: Section 10, including clause (35A)
Last reviewed: 27 October 2026. This article explains the statutory framework and is not a substitute for advice on a particular assessment year or transaction.