i. Responsibility of TDS under the section 195(1)
•TDS is to be deducted by a person as ‘responsible’ to pay any interest or ‘any other sum’ to a non-resident of India.
ii. Definition of a Non-Resident
•‘Definition’ of a non-resident is to includes an individual and also ‘any’ kind of entity as located or incorporated ‘outside’ India
iii. TDS on Salaries under the section 192 or 195
•TDS is to be deducted on payment to a non-resident for ‘salaries’ under the Section 192 ‘not’ under the Section 195 of Income Tax Act, 1961.
iv. TDS on Credit or Payment
•TDS is to be deducted at time of ‘credit’ to account of payee or at time of payment whichever is earlier.
v. Rate of TDS in DTAA
•Rate of TDS is to be applied as applicable under the Income Tax Act, 1961 or as applicable in ‘DTAA’ whichever is ‘lower’
vi. Deemed Credit of Interest or any Other Sum
a) ‘Deemed’ credit is to include the following heads :-
(aa) Interest payable account
(ab) Suspense account
(ac) Any ‘other’ name
b) Henceforth TDS is to be deducted beside that same is ‘not’ directly credited to account of a non-resident payee
vii. Proportionate TDS with Permission of Assessing Officer (AO) under the section 195(2)
a) ‘Payer’ is permitted to apply before AO where he is observing that 100% payments not ‘chargeable to tax’ in India
b) Hence payer is permitted to obtain a general or special permission for ‘proportionate’ TDS from the AO
viii. O% TDS with a Permission of AO under the section 195(3)
a) ‘Payee’ is permitted to apply before AO under the section 197 for granting a certificate to remit the interest or any other sum ‘with 0%’ TDS
b) Hence payer is permitted ‘not’ to deduct 0% TDS till certificate is in force
ix. Validity of Certificate under the section 195(4)
‘Certificate’ will remain in force ‘till’ date as specified in it or till date of cancellation where certificate is cancelled by AO ‘before’ expiry of it.
x. Important Clarification’s
- Section 195 is covering ‘all’ payments except those covered under the head ‘salaries’ under the Section 192
- Minimum threshold limit is ‘not’ prescribed under the Section However minimum thresh hold limit is prescribed under the Section 192
- Payer is permitted to submit an application before Board for Advance Ruling (BAR) for obtaining an opinion against applicability of under the section 195
- Section 195 is to be read along with other sections i.e. 4, 5 and 9 of income tax Act, 1961
2. Remittance for the Payments to a ‘Non’ Resident of India
- Form No.15 CB is required from a Practicing Chartered Accountant
a) ‘Payer’ is required to furnish certain information’s for a remittance/payment to a non-resident in form No. 15CA through electronic mode
b) Form No. 15CA is be submitted ‘after’ obtaining certificate from a practicing Chartered Accountant in India in Form No.15CB in accordance to the Rule 37BB
- Form No.15CB is ‘not’ required
- Form No 15CB is ‘not’ required where payer is remitting for a
a) ‘Diplomatic’ mission as operating in India.
b) ‘Generally’ permitted for ‘medical expenses’ etc. under the Liberalized Remittance Scheme (LRS)
c) ‘Specifically’ permitted for ‘import of goods’ etc.
- Incomes Deemed to Accrues or Arises by a ‘non’ resident of India
a) TDS is to be deducted on ‘all’ incomes actually earned or ‘deemed’ earned by a non-resident in India
(aa) Incomes actually or ‘deemed’ earned through a ‘business connection’ in India
(ab) Incomes from a property as ‘located’ in India
(ac) Incomes from a other asset as ‘existed’ in India
(ad) Incomes from another source as ‘existed’ in India
(ae) Incomes from another property as ‘located’ in India
b)TDS is to be deducted by the ‘Govt’. of India on incomes under the head ‘salaries’ to a citizen of India for the services as provided ‘outside’ India under the Section 192 ‘not’ 195
c) TDS is to be deducted on incomes under the following heads applying at prevailing rates in Income Tax Act, 1961 or in DTAA whichever is ‘lower’.
(ca) Interest
(cb) Royalty
(cc) Fees for technical services (FTS)
- Important Clarifications on the Payments to a ‘non’ resident of India
a) TDS is to be deducted on ‘all’ payments made under head Interest, Royalty and FTS as paid by the ‘Govt.’ of India or by a ‘any’ resident of India
b) However ‘no’ TDS is to be deducted where paid by the Govt. of India or a resident of India for utilizing the following things as existed ‘outside’ India and also these are ‘not’ chargeable to tax in India
(ba) Funds as ‘formed’ Outside India
(bb) Properties as ‘located’ Outside India
(bc) Intellectual Rights as ‘existed’ Outside India
(bd) Information’s as ‘available’ Outside India
(be) Services as ‘utilized’ for any business, profession or earning incomes outside India.
c) TDS is to be deducted on incomes earned by a non-resident against a business or profession as carried for earning of an income ‘in’ India
d) Term ‘royalty’ is defined under explanation 2 of clause (vi) and (vii) of Section 9(1) of Incomes Tax Act, 1961
e) TDS on ‘Salaries’ payments to a resident and non- resident ‘both’ are to be deducted along with Education cesses + Surcharge
f) TDS Provisions of section 206AA are also applicable to a non-resident where valid Pan is ‘not’ provided by the pay Hence TDS @ 20% or applicable rate of TDS whichever ‘higher’ is required from a non-resident also.
g) TDS is ‘not’ required on interest payments on NRE and FCNR accounts
h) TDS Provisions of section 206AA are ‘not’ applicable to a non-resident where following ‘all’ information’s are provided by the non-resident
i.) Name
ii.) E-mail id
iii.) Address in the foreign country
iv.) Tax Residency certificate (TRC) from foreign Govt
v.) Tax Identification Number (TIN) in foreign country ‘like’ PAN in India
i) TDS + Education Cess + Surcharge are to be deducted on the payments to a non-resident payee
j) TDS @30% + Surcharge + Education cess are to be deducted on payments to a non-resident on ‘Non’-Resident Ordinary Account (NRO).