1) Who is responsible to deduct tax u/s 196B?

Any person responsible for making payment to Offshore Fund.

2) Nature of Payment

a) Income from units referred to in section 115AB

b) Long-term capital gain arising from transfer of such units

3) When to Deduct TDS under Section 196B?

At the time of credit of such income to the account of payee or at the time of payment, whichever is earlier.

For this purpose, ―payment‖ can be in cash or by issue of a cheque or draft of by any other mode.

4) Rate of TDS under Section 196B

The rate of tax deduction u/s 196B is 10 %( +SC+H&E Cess)

Extract of Section 195A & 196B of Income Tax Act, 1961

195A. In a case other than that referred to in sub-section (1A) of section 192, where under an agreement or other arrangement, the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then, for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement.

In a case other than that referred to in sub-section (1A) of section 192, Where under an agreement or arrangement, the tax chargeable on any income which is subject to tax deduction, is to be borne by the payer of income, then while deducting tax, such income shall be increased to such amount as would, after deduction of tax, be equal to the net amount payable under such agreement or arrangement.

Section 196B TDS on long term capital gains (LTCG) from units referred to in section 115AB

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.

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