{"id":6908,"date":"2025-08-02T09:45:13","date_gmt":"2025-08-02T09:45:13","guid":{"rendered":"https:\/\/margbooks.com\/blogs\/?p=6908"},"modified":"2025-08-05T09:49:25","modified_gmt":"2025-08-05T09:49:25","slug":"how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act","status":"publish","type":"post","link":"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/","title":{"rendered":"How to Calculate TDS Deduction as per Section 194LBB of the Income Tax Act?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 ez-toc-wrap-left counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #1c6e70;color:#1c6e70\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #1c6e70;color:#1c6e70\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#What_is_Section_194LBB_of_the_Income_Tax_Act_and_Who_Needs_to_Care\" title=\"What is Section 194LBB of the Income Tax Act and Who Needs to Care?\">What is Section 194LBB of the Income Tax Act and Who Needs to Care?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#Real-world_Example\" title=\"Real-world Example:\">Real-world Example:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#TDS_Rates_under_Section_194LBB_of_the_Income_Tax_Act\" title=\"TDS Rates under Section 194LBB of the Income Tax Act\">TDS Rates under Section 194LBB of the Income Tax Act<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#Another_Real-World_Scenario\" title=\"Another Real-World Scenario:\">Another Real-World Scenario:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#How_to_Calculate_TDS_under_Section_194LBB_of_the_Income_Tax_Act\" title=\"How to Calculate TDS under Section 194LBB of the Income Tax Act?\">How to Calculate TDS under Section 194LBB of the Income Tax Act?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#Compliance_Rules_for_Fund_Managers_and_Accountants\" title=\"Compliance Rules for Fund Managers and Accountants\">Compliance Rules for Fund Managers and Accountants<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#Why_Accountants_and_Firms_Trust_MargBooks\" title=\"Why Accountants and Firms Trust MargBooks?\">Why Accountants and Firms Trust MargBooks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/margbooks.com\/blogs\/how-to-calculate-tds-deduction-as-per-section-194lbb-of-the-income-tax-act\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n\n<p>The main Section 194LBB of the Income Tax Act is important if you\u2019re earning income from investment funds, like an AIF (Alternative Investment Fund). This section tells us how tax is to be deducted from income paid to unit holders. It\u2019s a bit technical as we\u2019ll simplify everything with examples.&nbsp;<\/p>\n\n\n\n<p>Whether you\u2019re a CA, a partnership firm, or a business investor, this guide will help you calculate TDS correctly. Many Indian professionals now use the software MargBooks to stay updated and automate these deductions easily.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Section_194LBB_of_the_Income_Tax_Act_and_Who_Needs_to_Care\"><\/span><strong>What is Section 194LBB of the Income Tax Act and Who Needs to Care?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 194LBB of the Income Tax Act deals with TDS (Tax Deducted at Source) on income paid by an investment fund (Category I or II AIFs) to its unit holders. Those needs are as follows:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If you&#8217;re an investment fund, you must deduct TDS before distributing income to unit holders (except income exempt under Section 10).<\/li>\n\n\n\n<li>If you\u2019re a unit holder (such as a company, firm, or individual investor), TDS will be deducted from the income you receive.<\/li>\n\n\n\n<li>This applies only if the investment fund is not taxed on that income itself (i.e., pass-through status applies).<\/li>\n<\/ul>\n\n\n\n<div class=\"btn-div\">\n\n    <a href=\"https:\/\/me9.in\/MBB\" class=\"marg-btn\" target=\"_blank\" rel=\"noopener\">Get Online Accounting Software<\/a>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Real-world_Example\"><\/span><strong>Real-world Example:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Let\u2019s say an AIF in Mumbai distributes \u20b910 lakh of income among five investors. Each one gets \u20b92 lakh. Before paying, the fund has to deduct TDS based on the investor\u2019s status (individual, company, etc.).<\/p>\n\n\n\n<p>Our <a href=\"https:\/\/margbooks.com\/billing-software.html\">online billing software<\/a> is used by many CAs working with such funds to keep these records straight and auto-calculate TDS as per investor type.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TDS_Rates_under_Section_194LBB_of_the_Income_Tax_Act\"><\/span><strong>TDS Rates under Section 194LBB of the Income Tax Act<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The TDS rates vary depending on who receives the income:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Resident Individual or HUF: 10%<\/li>\n\n\n\n<li>Company, Partnership Firm, LLP (resident): 30%<\/li>\n\n\n\n<li>Non-resident investors (including NRIs): As per rates in force under Section 195 (with applicable surcharge and cess)<\/li>\n<\/ul>\n\n\n\n<p>If PAN is not available, TDS will be deducted at 20% (as per Section 206AA).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Another_Real-World_Scenario\"><\/span><strong>Another Real-World Scenario:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A Bangalore-based partnership firm receives \u20b95 lakh from a Category II AIF. The AIF must deduct 30% TDS, i.e., \u20b91.5 lakh, before making the payment. The firm can later claim this while filing its return. Platforms such as MargBooks help automate this reporting and link directly with online filing systems.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_Calculate_TDS_under_Section_194LBB_of_the_Income_Tax_Act\"><\/span><strong>How to Calculate TDS under Section 194LBB of the Income Tax Act?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To calculate TDS, follow these simple steps:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Identify the nature of the recipient: individual, firm, company, or non-resident<\/li>\n\n\n\n<li>Check PAN availability, a higher rate of 20% applies<\/li>\n\n\n\n<li>Determine TDS rate as per the recipient category<\/li>\n\n\n\n<li>Calculate gross income to be distributed<\/li>\n\n\n\n<li>Apply the relevant TDS rate to the distributed income<\/li>\n\n\n\n<li>Deduct TDS before payment<\/li>\n\n\n\n<li>Deposit TDS with the government within the due dates<\/li>\n\n\n\n<li>File TDS return (Form 26Q\/27Q)<\/li>\n<\/ul>\n\n\n\n<p>With our <a href=\"https:\/\/margbooks.com\/s\/online-invoice-software\/\">online invoice software<\/a>, all of this can be auto-computed by simply selecting the investor type and inputting the income details. It ensures no manual errors and keeps you audit-ready.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Compliance_Rules_for_Fund_Managers_and_Accountants\"><\/span><strong>Compliance Rules for Fund Managers and Accountants<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you\u2019re managing or auditing an AIF or LLP, here\u2019s what you need to ensure:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>TAN (Tax Deduction Account Number) is mandatory.<\/li>\n\n\n\n<li>TDS must be deposited by the 7th of the following month.<\/li>\n\n\n\n<li>TDS returns (Form 26Q\/27Q) must be filed quarterly.<\/li>\n\n\n\n<li>TDS certificates (Form 16A) must be issued to unit holders.<\/li>\n<\/ul>\n\n\n\n<div class=\"btn-div\">\n\n    <a href=\"https:\/\/me9.in\/MBB\" class=\"marg-btn\" target=\"_blank\" rel=\"noopener\">Get Accounting Software<\/a>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Accountants_and_Firms_Trust_MargBooks\"><\/span><strong>Why Accountants and Firms Trust MargBooks?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are a few reasons why professionals prefer MargBooks:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It helps Indian investment funds auto-calculate TDS as per each investor\u2019s tax status.<\/li>\n\n\n\n<li>It generates all the entries and TDS deductions together.<\/li>\n\n\n\n<li>CAs and accountants use it to sync reports with e-filing portals.<\/li>\n\n\n\n<li>Small LLPs and firms use it to manage all payables with TDS compliance.<\/li>\n<\/ul>\n\n\n\n<p>Using our online billing software makes this part smooth. It handles TDS auto-deductions during payout entries and generates return-ready files.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you\u2019re involved in fund distribution, investment management, or receive income from AIFs, understanding Section 194LBB of the Income Tax Act is crucial. The TDS rules may seem complicated, but with a step-by-step approach and system, <a href=\"https:\/\/margbooks.com\/\">MargBooks<\/a>, the whole process becomes manageable.&nbsp;<\/p>\n\n\n\n<p>Whether you\u2019re a chartered accountant, business owner, or investor, proper calculation and timely deduction can save you from penalties and ensure smooth compliance. Want to stay on top of your TDS game? You can learn the law, automate with our software, and use the right tools to simplify compliance under Section 194LBB of the Income Tax Act.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The main Section 194LBB of the Income Tax Act is important if you\u2019re earning income from investment funds, like an AIF (Alternative Investment Fund). This section tells us how tax is to be deducted from income paid to unit holders. It\u2019s a bit technical as we\u2019ll simplify everything with examples.&nbsp; Whether you\u2019re a CA, a [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":6909,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[1948],"tags":[57,54],"class_list":["post-6908","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income-tax","tag-cloud-based-accounting-software","tag-online-accounting-software"],"blocksy_meta":[],"blog_post_layout_featured_media_urls":{"thumbnail":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1-150x150.jpg",150,150,true],"full":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",1200,576,false]},"categories_names":{"1948":{"name":"Income Tax","link":"https:\/\/margbooks.com\/blogs\/category\/income-tax\/"}},"tags_names":{"57":{"name":"cloud based accounting software","link":"https:\/\/margbooks.com\/blogs\/tag\/cloud-based-accounting-software\/"},"54":{"name":"online accounting software","link":"https:\/\/margbooks.com\/blogs\/tag\/online-accounting-software\/"}},"comments_number":"0","wpmagazine_modules_lite_featured_media_urls":{"thumbnail":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1-150x150.jpg",150,150,true],"cvmm-medium":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",300,144,false],"cvmm-medium-plus":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",305,146,false],"cvmm-portrait":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",400,192,false],"cvmm-medium-square":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",600,288,false],"cvmm-large":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",1024,492,false],"cvmm-small":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",130,62,false],"full":["https:\/\/margbooks.com\/blogs\/wp-content\/uploads\/2025\/08\/Section-194LBB-of-the-Income-Tax-Act-1.jpg",1200,576,false]},"_links":{"self":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts\/6908","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/comments?post=6908"}],"version-history":[{"count":1,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts\/6908\/revisions"}],"predecessor-version":[{"id":6910,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/posts\/6908\/revisions\/6910"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/media\/6909"}],"wp:attachment":[{"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/media?parent=6908"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/categories?post=6908"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/margbooks.com\/blogs\/wp-json\/wp\/v2\/tags?post=6908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}