Section 196A of Income Tax Act "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 73[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
74[by any mode], whichever is earlier, deduct income-tax
thereon at the rate of twenty per cent.
75[***]
(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 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 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.
196B. Where any income in respect of units referred to in section 115AB or by way of long-term capital gains arising from the transfer of such units is payable to an Offshore Fund, 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 ten per cent.