Payments to Non Resident u/s 195

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2011 My friend,a Non Resident has invested certain amount in a property.On cancellation he is getting a premium.The DTA states that Cap Gains shld be taxed in accordance with the provisions of the domestic law.He is providing the PAN No..The CBDT circular states that the tax shld be lieved on the income chargable to tax in India.The buyer on the advice of his consultant is insisting on deducting 20% on the ENTIRE payment.Opinion req asap??

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
Follow

07 July 2011 TAX IS TO BE DEDUCTED AT 20.6 PERCENT
ON THE INCOME
INCOME IN THIS CASE IS CG
BUT IN ORDER THAT TAX IS DEDUCTED ONLY ON CG U WILL HAVE TO APPLY TO AO UNDER SECTION 195(2) ONLY HE WILL DECIDE THE AMT ON WHICH TAX IS TO BE DEDUCTED
IN U DONOT APPLY THEN TAX WILL BE DEDUCTED ON ENTIRE AMOUNT

CA MANOJ GUPTA
JODHPUR
09828510543

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2011 The object of Sec195(2) is to vary the rate of deduction of tax.When the quantum of CP and SP are easily available what is the purpose of approaching the AO??

Reply asap...

Upgrade to CAclubindia Pro. Subscribe Now!

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
Follow

08 July 2011 PLEASE GO TH SECTION 195(2) FIRST
IT DOES NOT TALK ABT RATE VARIATION
IT SAYS THAT
"Where the person responsible for paying any such sum chargeable under this Act [(other than salary)] to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the [Assessing] Officer to determine, [by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable "
IF U GO BY SECTION 195(1) THEN TAX IS DEDUCTIBLE ON THE ENTIRE SUM PAYABLE WHICH IS SALE VALUE BECAUSE THE PATER IS CONCERNED WITH THE SUM PAID HE HAS NO KNOWLEDGE OR POWER TO VERIFY EXACT AMT OF CAP GAINS
THAT IS WHY IT IS ADVIABLE TO MAKE AN APPLICATION UNDER SECTION 195(2)

Querist : Anonymous

Querist : Anonymous (Querist)

08 July 2011 The query was when the cost and the sale proceed are easily available and verifiable is it obligatory or mandatory to approach the assessing officer or can conclude on his own the tax liability as per the provision of the IT Act??

Reply asap...

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
Follow

10 July 2011 SEE THE SECTION 195(1) FASTENS LIAB TO DEDUCT TAX ON ANY SUM WHICH IS CHARGEABLE TO TAX IN INDIA IT DOSE NOT TALK ABT INCOME COMPONENT IN THE SUM PAYABLE
NOW PAYER HAS NO MECHANISM TO VERIFY THE INCOME(WHICH IS CG IN THIS CASE)SO HE WILL INSIST ON DEDUCTING TAX ON ENTIRE AMT(WHICH IS SALE VALUE)
HENCE U ARE ADVISED TO GO TO AO AND FILE APPLICATION UNDER SECTION 195(2)

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
Follow

12 July 2011 the first issue according to me is whether the amount received is a capital receipt or revenue receipt.

Here the property was booked and on cancellation a premium is being offered.Here there is no sale of property but only booking and cancellation.So can we say that is a revenue receipt chargeable to tax ?????????

I invite the views of other experts on the subject.

Anuj
0-9810106211