Statutory position — ss.196A, 196B and 196C: three fixed-rate deduction sections for non-residents, only one of which carries a treaty proviso, and none of which is in the s.197 list
CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
We are remitting income on mutual fund units to a foreign company, and separately paying on Global Depository Receipts. Do we deduct under section 195 at rates in force, and can the payee get a lower deduction certificate?
No. Where one of these three sections applies, it and not section 195 supplies the rate, and the rate is a figure fixed in the section rather than the 'rates in force'. Section 196A covers income in respect of units of a Mutual Fund specified under clause (23D) of section 10, or from the specified company referred to in the Explanation to clause (35) of section 10, paid to a non-resident not being a company or to a foreign company, at twenty per cent; it alone carries a proviso letting the rate fall to the treaty rate where an agreement under section 90(1) or section 90A(1) applies and the payee has furnished the certificate referred to in section 90(4) or section 90A(4). Section 196B covers income in respect of units referred to in section 115AB, and long-term capital gains on their transfer, payable to an Offshore Fund. Section 196C covers interest or dividends on bonds or Global Depository Receipts referred to in section 115AC, and long-term capital gains on their transfer, payable to a non-resident. Sections 196B and 196C each now carry a three-limb rate: ten per cent on the income, ten per cent on long-term capital gains where the transfer takes place before 23 July 2024, and twelve and one-half per cent where it takes place on or after that date. None of the three sections is in the list in section 197(1).
