Section 115TB of the Income-tax Act, 1961: Interest Payable for Non-Payment of Tax
Section 115TB prescribed simple interest for delayed payment of the additional income-tax levied on income distributed by securitisation trusts under the former Section 115TA regime.
What does Section 115TB provide?
Under Section 115TB, if the person responsible for distributing income on behalf of a securitisation trust, or the securitisation trust itself, failed to pay all or part of the additional income-tax referred to in Section 115TA(1) within the time allowed by Section 115TA(2), simple interest became payable on the unpaid amount.
The statutory interest rate was 1% for every month or part of a month. The period began on the day immediately following the last date for payment and ended on the date the tax was actually paid.
Definitions and connected legal provisions
Section 115TA(1): Tax on distributed income
Under the earlier regime, a securitisation trust was liable to additional income-tax on specified distributions to investors. The historical rates were 25% for individual and Hindu undivided family investors and 30% for other taxable investors, subject to the statutory exception for persons whose income was not chargeable to tax.
Section 115TA(2): Time limit
The person responsible for making the distribution had to deposit the tax within 14 days from the date of distribution or payment, whichever was earlier.
Section 115TC: Assessee in default
This related provision dealt with the consequences of non-payment of tax under Section 115TA, including treatment as an assessee in default and application of collection and recovery provisions.
How was interest under Section 115TB calculated?
| Element | Rule |
|---|---|
| Unpaid amount | Tax payable under Section 115TA(1) |
| Rate | Simple interest at 1% per month or part thereof |
| Starting date | Day after the statutory tax payment deadline |
| Ending date | Date of actual payment |
Illustration
Assume an unpaid historical distribution-tax liability of Rs. 1,00,000 remained overdue for one full month and part of another month. Interest under Section 115TB would be calculated for two months: Rs. 1,00,000 × 1% × 2 = Rs. 2,000. This is illustrative only; actual liability depends on the relevant dates and facts.
Does Section 115TB apply to current securitisation trust distributions?
Section 115TA(5), inserted with effect from 1 June 2016, states that Section 115TA does not apply to income distributed to investors on or after that date. Accordingly, Section 115TB does not ordinarily create interest liability on post-31 May 2016 distributions under that discontinued tax-on-distribution regime.
The Finance Act, 2016 introduced an investor-level tax framework through Section 115TCA and withholding provisions under Section 194LBC. Section 115TCA generally attributes the income to investors according to its nature and proportion, rather than imposing the former additional tax on the trust's distributions. For later periods, the Income-tax Act, 2025 and applicable savings or transition provisions must also be considered.
Historical unpaid tax and interest should be assessed by reference to the law applicable to the relevant distribution and payment dates. The end of the distribution-tax regime did not, by itself, establish that earlier unpaid amounts were waived.
Related provisions and official sources
- Section 115TA - Tax on distributed income to investors
- Income-tax Act, 1961 - official consolidated text (includes Section 115TB)
- Section 115TCA - Tax on income from securitisation trusts
- Section 194LBC - TDS on income from securitisation trusts
- CBDT Circular No. 3/2017 - Explanation of Finance Act, 2016 changes
Updated: 27 October 2026. This article explains the historical provision and its transition; it is not a substitute for applying the relevant law to a particular tax year.