Section 196A - Income in respect of units of non-residents - Income-tax Act, 1961

1 [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 5 [ from the specified company referred to in the Explanation to clause (35) of section 10 ] shall, at the time of credit of such income to the account of the payee or at the time of payment thereof 6 [ by any mode ] , whichever is earlier, deduct income-tax thereon at the rate of twenty per cent : 8 [ Provided that where an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A applies to the payee and if the payee has furnished a certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A, as the case may be, then, income-tax thereon shall be deducted at the rate of twenty per cent. or at the rate or rates of income-tax provided in such agreement for such income, whichever is lower. ] 7 [ **** ] (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 3 [ the Foreign Exchange Management Act, 1999 (42 of 1999) ] , and the rules made thereunder. Explanation. -For the purposes of this section- ( a ) foreign currency shall have the meaning assigned to it in 4 [ the Foreign Exchange Management Act, 1999 (42 of 1999) ] ; ( 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. ] **************** NOTES:- 1. Substituted vide Section 37 of the Finance Act, 1995 w.e.f. 01-07-1995 before it was read as, 196A. Tax not to be deducted from any income payable to unit holders of Mutual Fund. (1) Subject to the provisions of sub-section (2), no deduction of tax shall be made from any income payable in respect of units of a Mutual Fund, specified under clause (23D) of section 10, to its unit-holders being persons other than foreign companies. (2) Where any income referred to in sub-section (1) is payable to a unit-holder, being a foreign company, the person responsible for making the payment 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. (3) Notwithstanding anything contained in this Act, no deduction of tax shall be made from any income payable in respect of units issued under any scheme of the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), to any institution or fund where such income is not liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (22) or clause (22A) or clause (23) or clause (23AA) or clause ( 23C) of section 10. Earlier , Substituted vide Section 32 of the Direct Tax Laws (Amendment) Act, 1989 w.e.f. 15-03-1989 before it was read as, 196A. Tax not to be deducted from any sums payable to unit-holders of Mutual Fund. Notwithstanding anything contained in the foregoing provisions of this Chapter, no deduction of tax shall be made by a public sector bank or a public financial institution referred to in clause (23D) of section 10 from any sums payable to unit holders of a Mutual Fund specified under that clause. And was Amended vide Section 57 of the Finance (No. 2) Act, 1991 w.e.f. 01-10-1991 And was Amended vide Section 41 of the Finance Act, 1994 w.e.f. 01-06-1994 2. Inserted vide Section 81 of the Finance Act, 2003 w.e.f. 01-04-2003 Earlier , Inserted vide Section 75 of the Finance Act, 1999 w.e.f. 01-06-1999 And was Omitted vide Section 82 of the Finance Act, 2002 w.e.f. 01-06-2002 before it was read as, Provided that no deduction shall be made under this sub-section from any such income credited or paid on or after the 1st day of June, 1999. 3. Substituted vide Section 4 of the Finance Act, 2013 w.e.f. 01-04-2014 before it was read as, the Foreign Exchange Regulation Act, 1973 (46 of 1973) 4. Substituted vide Section 4 of the Finance Act, 2013 w.e.f. 01-04-2014 before it was read as, the Foreign Exchange Regulation Act, 1973 (46 of 1973) 5. Substituted vide Section 87 of the Finance Act, 2020 w.e.f. 01-04-2020 before it was read as, of the Unit Trust of India 6. Substituted vide Section 87 of the Finance Act, 2020 w.e.f. 01-04-2020 before it was read as, in cash or by the issue of a cheque or draft or by any other mode 7. Omitted vide Section 87 of the Finance Act, 2020 w.e.f. 01-04-2020 before it was read as, 2 [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. ] 8. Inserted vide Section 91 of the Finance Act, 2023 w.e.f. 01-04-2023