Amended and updated notes on section 196D of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Income of Foreign Institutional Investors from securities.
Chapter XVII (Sections 190 to 234G) of the Income Tax Act 1961 deals with the provisions related to collection and recovery of tax. Section 196D of IT Act 1961 provides for Income of Foreign Institutional Investors from securities.
Recently, we have discussed in detail section 196C (Income from foreign currency bonds or shares of Indian company) of IT Act 1961. Today, we learn the provisions of section 196D of Income-tax Act 1961. The amended provision of section 196D is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 196D of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.
Section-196D: Income of Foreign Institutional Investors from securities
Section 196D(1) of Income Tax Act
Where any income in respect of securities referred to in clause (a) of sub-section (1) of section 115AD, not being income by way of interest referred to in section 194LD, is payable to a Foreign Institutional Investor, 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 by any mode, whichever is earlier, deduct income-tax thereon at the rate of twenty per cent.
Section 196D(1A) of Income Tax Act
Where any income in respect of securities referred to in clause (a) of sub-section (1) of section 115AD, not being income by way of interest referred to in section 194LD, is payable to a specified fund [referred to in clause (c) of the Explanation to clause (4D) of section 10], 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 by any mode, whichever is earlier, deduct the income-tax thereon at the rate of ten per cent:
Provided that no deduction shall be made in respect of an income exempt under clause (4D) of section 10.
[Sub-section(1A) of section 196D has been inserted w.e.f. 01.11.2020 by the Income Tax Act 2020]
Section 196D(2) of Income Tax Act
No deduction of tax shall be made from any income, by way of capital gains arising from the transfer of securities referred to in section 115AD, payable to a Foreign Institutional Investor.