The 60-second version
Section 196G requires 5% TDS on interest paid to non-residents on foreign currency bonds or Indian company shares — distinct from Section 196C FCB interest lane.
196G is FCB interest — 196C is FCB income to offshore fund
Section 196G applies when an Indian payer remits interest on foreign currency bonds or specified Indian company shares to a non-resident — 5% TDS unless DTAA provides lower rate.
Distinct from Section 196C which covers income from foreign currency bonds to offshore funds — 196G is the retail NR bondholder lane.
Offshore fund lane: Section 196C guide for FCB income to offshore funds.
FCB and NR income TDS matrix
| Section | Rate | Income type |
|---|---|---|
| 196G | 5% | FCB interest to NR |
| 196C | 10% | FCB income to offshore fund |
| 196E | 5% | IDF units to NR |
| 195 | DTAA rate | Other NR payments |
196G sequence
Classify bond
FCB vs rupee bond.
Deduct 5%
Payer withholds at source.
Form 16A
TDS certificate to NR.
Form 26AS
Credit in NR ITR.
DTAA
Form 67 if reduced rate.
TDS loop
196G kit
- Bond certificate.
- Interest challan.
- Form 16A.
- DTAA cert.
- Form 67 if credit.
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vs 196C
196G is NR individual/entity bondholder; 196C is offshore fund receiving FCB income at 10%.
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vs 196C?
196G covers NR bondholder interest at 5%; 196C covers offshore fund FCB income at 10%.
DTAA rate?
India-US/UK DTAA Article 11 may reduce rate — file Form 67.
Resident holder?
196G is NR-only — resident bond interest taxed under normal income rules.
Rupee bonds?
Rupee-denominated bonds use Section 194 interest TDS — not 196G.
Form 26AS miss?
See AIS mismatch troubleshooting guide.
RNOR?
Foreign bond interest may be exempt in RNOR year if sourced abroad.
Your tax year is already running.
RNOR status, exit timing, and DTAA benefits all depend on decisions you make before you land. Don't guess.