CBDT CIRCULAR PRESCRIBING CONDITIONS FOR RELAXATION FROM HIFGHER TDS U/S 206AA OF THE INCOME TAX ACT 1961 FOR NON-RESIDENTS AND FOREIGN COMPANY:

CBDT CIRCULAR PRESCRIBING CONDITIONS FOR RELAXATION FROM HIFGHER TDS U/S 206AA OF THE INCOME TAX ACT 1961 FOR NON-RESIDENTS AND FOREIGN COMPANY:

Section 195 of the Income-Tax Act, 1961 states that the income earned by non-residents in the form of royalties, technical fees, etc. is subjected to TDS by the person who is responsible to make such payment to the non-resident assessee. The section does not mention any rate at which the TDS is to be done by the person liable to make the payment.

However, the rates are referred in PART-II of the First Schedule to the relevant Act.

Further, as per Section 206AA, PAN is mandatorily required to be furnished by the deductee, otherwise income is to be taxed at the higher of the following rates:

a) The Rate in Force

b) The rate specified in the Act

c) The rate of 20%

Further Finance Act 2016 provided that provisions of section 206AA regarding higher TDS in case of non availability of PAN shall not apply to non-resident, not being a company, or to a foreign company, subject to such conditions as may be prescribed.

Now CBDT has come up with Notification No 53/2016 dated 24^th June providing conditions and for relaxation of higher TDS u/s 206AA of the Act for non availability of PAN Card in case of Non-Resident/Foreign Company.

 As per said notification section 206AA will not be applicable for following nature of transactions:

ü  Interest

ü  Royalty

ü  Fess for technical services

ü  Payments on transfer of any capital asset,

However deductee will be required to furnish following details to the deductor for taking benefit of this notification:

ü  Name, e-mail id, contact number;

ü   Address in the country or specified territory outside India of which the deductee is a resident;

ü   A certificate of his being resident in any country or specified territory outside India from the Government of that country or specified territory if the law of that country or specified territory provides for issuance of such certificate; (iv) Tax Identification Number of the deductee in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the deductee is identified by the Government of that country or the specified territory of which he claims to be a resident.