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.

All about Form 49C under Income-Tax Act and its submission by liaison office in India

All about Form 49C under Income-Tax Act   and its submission by liaison office in India

The last date for filing of Form 49C is almost there and it’s 30^th May 2015 which was notified vide Notification No.5/2012 dated 6-2-2012 with effect from 1^st April 2012.

Form 49C is primarily required to be filed by Non-residents having Liaison office(s) in India. It is to be filed in pursuance of Section 285 of the Income Tax Act and in accordance with rule 114DA of the Income Tax Rules.

Section 285 of Income Tax Act, 1961 read with rule 114DA mandates that Every person, being a non-resident having a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 (42 of 1999), shall, in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within sixty days from the end of such financial year, a statement in form 49C of its activities.

However, as per RBI Master Circular No. 7/2012-13, dated 2-7-2012, the AAC is required to be filed within six months from the due date of the Balance Sheet. Therefore to that extent, there seems to be inconsistency between the due date of filing of Form No. 49C and AAC, which needs to be resolved.

Reserve Bank of India requires filing of an Annual Activity Certificate (AAC) annually after getting the same duly certified by a Chartered Accountant.

AAC is required to be filed prior to filing of Form 49C as the date of filing AAC is required to be mentioned in Form 49C.

Form 49C may be verified (Digitally Signed) by a Chartered Accountant or an Authorised Signatory for the purpose of e-filing the same.

In order to file Form 49C one needs to do the following:

1. Visit www.incometaxindiaefiling.gov.in

2. Login to the respective ID.

3. Go-to “e-file” and then click on “Prepare and Submit online Form (other than ITR)”.

4. Then on the page that appears, you need to select the Form, which in this case would be 49C, then select the relevant Assessment Year and then select the Digital Signature Certificate of the person who would be verifying Form 49C.

5. Then you will enter a page wherein you will have instructions w.r.t. Form 49C, followed by Form 49C itself, followed by “Attachments” page. Thus, fill-in and you are ready to go

Kindly note that attachments, if any, attached to Form 49C should not exceed 50MB in total and should either be in pdf or zip format.

Extract of Rule 114DA of Income Tax Rules

[Furnishing of Annual Statement by a non-resident having Liaison Office in India.

114DA. (1) The annual statement as provided under section 285 for every financial year, shall be furnished in Form No. 49C.

(2) The annual statement referred to in sub-rule (1) shall be duly verified by the Chartered Accountant or the person authorised in this behalf by the non-resident person, who shall be known as the Authorised Signatory.

(3) The annual statement referred to in sub-rule (1) shall be furnished in electronic form along with digital signature.

(4) The Director General of Income-tax (Systems) shall specify the procedure for filing of annual statement referred to in sub-rule (1) and shall also be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to statements so furnished.]

Extract of Section 285 of Income Tax Act, 1961

[Submission of statement by a non-resident having liaison office.

285. Every person, being a non-resident having a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 (42 of 1999), shall, in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within sixty days from the end of such financial year, a statement in such form and containing such particulars as may be prescribed.

Information courtesy : CA Sahil Jolly – Jolly & Co. Chartered Accountants