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Rate of TDS on Payment to Non Resident Under Section 196A of the Income Tax Act

Rate of TDS on payment of any income in respect of units of a Mutual Fund to non resident by any person other than a company under section 196A of the Income Tax Act is 20% at the time of payment of such mutual fund income to non resident.

Provided that no deduction shall be made under this section from any such income credited or paid on or after the 1st day of April, 2003.

Reference: Section 196A of the Income Tax Act,1961

Income in respect of units of non-residents.

196A. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any income in respect of units of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India shall, 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, deduct income-tax thereon at the rate of twenty per cent :

Provided that no deduction shall be made under this section from any such income credited or paid on or after the 1st day of April, 2003.

(2) Notwithstanding anything contained in sub-section (1), no deduction of tax shall be made from any income payable in respect of units of the Unit Trust of India to a non-resident Indian or a non-resident Hindu undivided family, where the units have been acquired from the Unit Trust of India out of the funds in a Non-resident (External) Account maintained with any bank in India or by remittance of funds in foreign currency, in accordance, in either case, with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and the rules made thereunder.

Explanation.—For the purposes of this section—

(a) “foreign currency” shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 (46 of 1973);

(b)  “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C;

(c)  “Unit Trust of India” means the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);

(d)  where any income as aforesaid is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

One thought on “Rate of TDS on Payment to Non Resident Under Section 196A of the Income Tax Act
  • HEMANGI A INGLE says:

    I, AGED 35 YEARS, INDIAN CITIZEN, WORK AS A RETAINER IN INDIA.
    MY EARNINGS FOR FY 2013-14 WILL BE RS. 221200/-. WILL THERE BE ANY TDS DEDUCTIONS FROM MY MONTHLY REMUNERATION? IF YES, HOW MUCH AND AT WHAT RATE OF TAX?
    I UNDERSTAND THAT SINCE THE INCOME IS JUST MARGINALLY MORE (BY RS.1200/-) THAN THE FIRST TAX SLAB OF RS. 220000/-, THERE MAY NOT BE ANY TDS. AM I CORRECT?
    PLEASE CLARIFY.

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