S. 196D deals with tax deducted on income in respect of securities referred to in clause a of Sub-section (1) of S. 115AD. Any person making payment to Foreign Institutional Investors shall, at the time of credit of such income to the account of payee or at the time of payment in cash, cheque/draft, etc whichever is earlier shall deduct tax @ 20% on such income.
The updated chart of tax Deduction at Source for FY 2015-16 or AY 2016-17 is as under:
| Section | Nature of Payment | Rate-HUF/Individual % | Rate-Others % |
| 196D | Payment to non-residents | Rates in force | Rates in force |
Reference:
As Per Section 196D, of the Income Tax Act, 1961-
Income of Foreign Institutional Investors from securities.
- (1) 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 in cash or by 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 :
Provided that no such deduction shall be made in respect of any dividends referred to in section 115-O.
(2) 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.