Section 196D - TDS on Income of foreign institutional investors from securities

TDS on foreign institutional investor income: prescribed withholding applies, treaty relief may lower withholding and capital gains are exempt.

TDS on income from securities payable to foreign institutional investors is subject to prescribed withholding rates plus surcharge and cess, with treaty-provided lower rates applying if the payee furnishes the required certificate. No TDS is to be deducted on capital gains from transfer of securities for such investors. Deduction is to be made at the earlier of credit or payment. 'Specified fund' status for preferential treatment is narrowly defined by fund form, registration, IFSC location and non-resident unit holding conditions, with limited exceptions; exempt dividend income is outside TDS and enhanced surcharge rates do not apply to dividend TDS.