Section 196B, 196C and 196D of Income Tax Act

Section 196B, 196C and 196D

Section 196B, 196C and 196D of Income Tax Act, 1961 covers provisions; relating to TDS deduction on income from units (including long-term capital gain on transfer of such units) to an offshore fund.

Section 196B, 196C and 196D of Income Tax Act

Section 196B, 196C and 196D

U/S 196B, the person responsible for making any payment in respect of units referred to in section 115AB; or by way of long-term capital gains arising from the transfer of such units, to an offshore fund; shall deduct TDS at 10% at the time of credit of such income to the account of the payee; or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode; whichever is earlier. In case if PAN is not furnished, TDS rate will be 20%.

For BOI and AOP, the surcharge is payable at 10% on income tax, if the amount payable is more than Rs. 10 lakhs where for a firm, the surcharge is payable at 10%, if the amount payable is more than Rs. 1 crore. However, for the non-domestic company, the surcharge is payable at 2.5% on income tax, only if such income exceeds Rs. 1 crore. Education cess and SHEC are also payable at 3% on the total amount on income tax and surcharge.

Section 196C of Income Tax Act

Section 196C covers the provision relating; to the deduction of TDS on income from foreign currency bonds or GDR of an Indian Company (including long-term capital gain on transfer of such bonds or GDR).

Any person responsible for making any payment by way of interest or dividends in respect of bonds or shares referred to in section 115AC; or by way of long-term capital gains arising from the transfer of such bonds or shares or Global Depository Receipts; to a non-resident, shall deduct TDS at 10% at the time of credit of such income to the account of the payee; or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. In case if PAN is not furnished, TDS rate will be 20%.

Note: No such deduction shall be made in respect of any dividends referred to in section 115-O.

The surcharge will be applicable as per above rates mentioned in section 196B.

Section 196D of Income Tax Act

Section 196D covers provisions relating; to the TDS deduction on the income of Foreign Institutional Investors from securities (not being the dividend or capital gain arising from such securities).

Under this section, a person responsible for making any payment in respect of securities referred to in section 115AD (1) (a) (not being an income by way of interest referred to in section 194LD), to a Foreign Institutional Investor, shall deduct TDS at 20%; at the time of credit of such income to the account of the payee; or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode; whichever is earlier.

Note: No deduction of TDS shall be made from any income in respect of any dividends referred to in section 115-O or by way of capital gains arising from the transfer of securities referred to in section 115AD, payable to a Foreign Institutional Investor.

For the purposes of this section; ‘securities’ shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contract (Regulation) Act, 1956. ‘Foreign Institutional Investor’ means an investor as the Central Government may; by notification in the Official Gazette, specify in this behalf.

Foreign Institutional Investors, which are registered with the SEBI, will be notified by the Central Government for the purposes of section 115AD.

Section 196B, 196C and 196D

READ MORE Section 80EE of Income Tax Act, 1961

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