The 60-second version
Section 196D requires 20% TDS on income from securities paid to Foreign Institutional Investors — distinct from 196C (non-dividend securities income) and retail NRI Section 195 remittance.
196D is FII dividend lane — retail NRI uses 196D on Indian dividends too
Section 196D applies when income from securities (including dividends) is paid to FIIs and qualified foreign investors who purchased securities in foreign currency.
Retail NRI shareholders also face 20% TDS under Section 196D on Indian company dividends — distinct from equity sale TDS under Section 195.
Non-dividend FII income: Section 196C guide.
FII dividend TDS matrix
| Section | Rate | Income type |
|---|---|---|
| 196D | 20% | FII/QFI dividends + securities income |
| 196C | 20% | FII securities income (non-dividend) |
| 194 | 10%/20% | Resident shareholder dividend |
| 195 | Treaty+ | NRI capital gains remittance |
196D sequence
Identify payer
Company or custodian.
Gross dividend
Pre-TDS amount.
26AS credit
Verify 20% TDS.
Form 67
DTAA reduced rate if eligible.
ITR
Declare dividend income.
Flow
196D kit
- Dividend advice.
- TDS cert.
- 26AS.
- Form 67.
- TRC if treaty.
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Retail NRI
196D applies to your Indian company dividends even if you are not an FII — custodian deducts at 20%.
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vs 196C?
196C non-dividend securities income; 196D includes dividends.
DTAA relief?
Form 67 + TRC — US treaty often 15% or 25% depending on holding.
Resident after return?
Dividend taxed in ITR — 196D TDS creditable.
Mutual fund dividend?
Section 196A for NRI MF — not 196D.
No PAN?
Higher TDS per Section 206AA.
Listed vs unlisted?
196D on securities income — listed equity dividends included.
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