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 by the Finance Act, 1995, w.e.f. 1-7-1995. Prior to its substitution, section 196A was substituted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 15-3-1989 and later amended by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991 and the Finance Act, 1994, w.e.f. 1-6-1994. 2. Inserted by the Finance Act, 2003, w.e.f. 1-4-2003. Earlier the proviso was inserted by the Finance Act, 1999, w.e.f. 1-6-1999 and later on omitted by the Finance Act, 2002, w.e.f. 1-6-2002. 3. Substituted vide Finance Act, 2013 w.e.f. April 1, 2014 , before it was read as the Foreign Exchange Regulation Act, 1973 (46 of 1973) . 4. Substituted vide Finance Act, 2013 w.e.f. April 1, 2014 , before it was read as the Foreign Exchange Regulation Act, 1973 (46 of 1973) . 5. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as of the Unit Trust of India 6. Substituted vide Finance Act, 2020 dated 27-03-2020 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 Finance Act, 2020 dated 27-03-2020 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 THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2023