This Article breifly covers about Important Provisions of (Section 195) of Income-tax Act 1961: Tax Deduction at source(TDS) on Payment of any other sum to a Non-resident.
Section 195
Payer( Person liable to deduct tax u/s 195 ):
Timing of Deduction:
Exception: Only at the time of payment in the case of interest payable by the Government or a public sector bank within the meaning of section 10(23D) or a public financial institution within the meaning of that clause.
Explanation 1.—For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
Section 195(2) : Application by Payer for Determing Income chargeable
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 in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, 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.
Section 195(3): Application by Payee for Lower/Nill Deduction of Tax
Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1).
Section 195(4): Validity of Certificate
A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation.
POWERS OF CBDT:
Section 195(6): Obligation of the payer
The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed.
last modified date 29/07/2020.
All persons, resident or non-resident, whether or not the non-resident person has—
(i) a residence or place of business or business connection in India; or
(ii) any other presence in any manner whatsoever in India.
Payee:
Non-resident, not being a company, or
a foreign company
Nature of Payment( Applicability of Sec-195):
(i) a residence or place of business or business connection in India; or
(ii) any other presence in any manner whatsoever in India.
Payee:
Non-resident, not being a company, or
a foreign company
Nature of Payment( Applicability of Sec-195):
- Any Interest, or
- Any other sum chargeable under the provisions of this Act
- Income chargeable under the head "Salaries"
- Interest on infrastructure debt fund
- Interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond)
Timing of Deduction:
At the time of credit of such income to the account of the payee, or
At the time of payment to payee
whichever is earlier.
At the time of payment to payee
whichever is earlier.
Exception: Only at the time of payment in the case of interest payable by the Government or a public sector bank within the meaning of section 10(23D) or a public financial institution within the meaning of that clause.
TDS Rates under Section 195:
| No | Particulars | TDS rate |
|---|---|---|
| 1 | Income from investments made by a NRI | 20% |
| 2 | Income from long-term capital gains referred to in Section 115E in case of NRI | 10% |
| 3 | long-term capital gains under section 112(1)(c)(iii) and Section 112A | 10% |
| 4 | Short-term capital gains under section 111A | 15% |
| 5 | Any other income by way of long-term capital gains | 20% |
| 6 | Interest Payable on Money borrowed in Foreign currency by Government or an Indian concern | 20% |
| 7 | Income by way of royalty payable by Government or an Indian concern | 10% |
| 8 | Income by way of royalty [not being royalty of the nature referred to point 7 above] | 10% |
| 9 | Income by way of fees for technical services payable by Government or an Indian concern | 10% |
| 10 | Any other income in case of Non-resident (not being a company) | 30% |
| 11 | Any other income in case of Foreign company | 40% |
Explanation 1.—For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
Section 195(2) : Application by Payer for Determing Income chargeable
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 in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, 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.
Section 195(3): Application by Payee for Lower/Nill Deduction of Tax
Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1).
Section 195(4): Validity of Certificate
A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation.
POWERS OF CBDT:
- Sectiom 195(5):
- Section 195(7):
Section 195(6): Obligation of the payer
The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed.
last modified date 29/07/2020.
Source "INCOMETAXINDIA"
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