Tds on payment to non-resident u/s. 195

Procedure for remittance to the Non-resident — issued vide CBDT Circular No. 4/2009 dated 29th June, 2009.

• Obtain certificate in Form No. 15CB from a Chartered Accountant

• Obtain PAN for the Non-Resident else 20% rate u/s 206AA.

• Tax calculated should be increased by surcharges except where treaty rates are applied.

• Tax has to be grossed up u/s 195A for all agreements entered after 2.6.2002 where tax is agreed to be borne by the payer.

• Tax has to be deducted only if it is required to be deducted on sums chargeable to tax in India under the Income-tax Act. Circular No. 786 dated 7th February, 2000.

• TDS on salary to non-residents (including Indian NR) is governed by sec. 192 and not 195.

• Non-residents making payments to non-residents are liable to TDS if the payments are chargeable to tax in India (228 ITR 487-AAR).
• Exchange rate on the day on which TDS is required to be deducted has to be considered.

• Payer can make a reference by simple letter on letter head/plain paper to Assessing Officer u/s. 195(2) of the Act (under Rule 10) if he opines that only portion of payment is going to be taxed and hence a request is made for determination of the amount on which tax has to be deducted.

• An application u/s 195(3) can be made by the payee to the AO for no deduction of tax for receipt of sums other than dividends or interest. (Form 15D). Certificate is valid for the financial year specified therein unless cancelled by AO anytime before the expiry of the financial year.

• An application u/s 197 can be made by the payee to the AO for no deduction of tax or at a lower rate of tax than rate prescribed to be deducted. (Form 13).

• Certificates u/s 195(3) and u/s 197 are not appealable.

• U/s 195 a non-resident is not entitled to basic/threshold exemption in respect of LTCG.

• Tax has to be deducted at rates prescribed under relevant Finance Act or at the rates prescribed/specified in treaty, whichever are beneficial to the assessee. Treaty is an option to the assessee.

• In case treaty rates are opted by the remittee/payee/recipient, take residency certificate of payee/receiver to determine DTAA of which country has to be applied.

• Furnish the information in Form 15CA, verified in the manner prescribed. Rule 37BB.

• Form No. 15CA to be then electronically uploaded on designated website

• Take printout of Form No. 15CA, sign and manually file with bankers/authorized dealers of the payee along with copy of Form 15CB. Approach Bank and ask them for remittance with cheque/account debit.

• Refund of TDS u/s 195 in certain circumstances – Circulars 790/20.4.2000 & 7/23.10.2007.

Courtesy : www.wirc-icai.org