TDS on Income from Units (Non-Resident)
Introduction
Section 196A provides that TDS must be deducted at 20% on income paid to a non-resident or foreign company from units of mutual funds or a specified company.
Key Provisions
- Deductor:Any person making payments related to:
o Units of a mutual fund specified under Section 10(23D).
o Units from a specified company referred to in Section 10(35).
- Deductee:Non-resident individuals, HUFs, or foreign companies, etc.
- Time of Deduction:At the time of credit or payment, whichever is earlier.
Rate of TDS
- 20% plus applicable surcharge and cess.
- If covered under a DTAA, TDS is deducted at 20% or the DTAA rate, whichever is lower, provided the recipient submits a Tax Residency Certificate (TRC).
- Higher rates apply if PAN is not provided (Section 206AA)
Exemptions from TDS
- No TDS if income is payable from Unit Trust of India (UTI)to:
o Non-Resident Indians (NRIs) or Non-Resident HUFs.
o Where units were purchased using funds from an NRE account or remitted in foreign currency as per FEMA regulations.
Compliance Requirements
- Lower/Nil Deduction Certificate:Not available under Section 197.
- Deposit of TDS:
o Challan ITNS 281 within 7 days from the end of the deduction month.
o For March deductions, deposit by 30th April.
o Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statement Filing:Quarterly submission in Form 27Q.
- TDS Certificate:Form 16A must be issued within 15 days from the due date of TDS statement filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Interest liability under Section 201.
o Penalty under Section 271C (up to the non-deducted amount).
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Rs. 200 per day penalty under Section 234E (limited to TDS amount).
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Penalty under Section 272A.