TDS on Income from Units Purchased in Foreign Currency
Introduction
Section 196B provides that TDS must be deducted on income from units purchased in foreign currency or long-term capital gains from their transfer when paid to an offshore fund.
Key Provisions
- Deductor:Any person making payments for:
o Income from units purchased in foreign currency.
o Long-term capital gains (LTCG) on transfer of such units.
- Deductee:Offshore funds investing in India through public sector banks, financial institutions, or specified mutual funds, with arrangements approved by SEBI.
- Time of Deduction:At the time of credit or payment, whichever is earlier.
- Threshold Limit:No minimum exemption limit—TDS applies irrespective of the amount.
Rate of TDS
- 12.5% on long-term capital gains
- 10% on any other income from units.
- Cess and Surcharge shall be applied.
- Higher rates apply if PAN is not provided (Section 206AA)
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.