Application to AO in New Form 15E under Rule 29BA & Section 195

Application to Assessing Officer (AO) under New Form 15E under Rule 29BA read with Section 195

Background

Section 195 of the Income-tax Act, 1961 (‘Act’) deals with deduction of tax at source in case of payments made to non-resident and Foreign Companies.

Sub-section 2 of Section 195 of the Act provides that where the person responsible for paying any sum chargeable under the Act to a non-resident considers that the whole of such sum would not be income chargeable in the case of recipient, he may make an application.

Finance Act 2019 (Act no. 2) had amended Section 195 (2) and Section 195(7) of the Act to provide that application for determination of appropriate proportion of sum chargeable, would be made to Assessing Officer (‘AO’) in such form and manner, as may be prescribed.

New Rule 29BA

Accordingly, the Central Board of Direct Taxes has now issued a notification No. 18/2021-Income Tax, Dated: March 16, 2021 and inserted a New Rule in the Income-tax Rules, 1962.  The new Rule is Rule 29BA. The Rule would be effective from 1 April 2021.

The new Rule 29BA deals with application for grant of certificate for determination of appropriate proportion (other than salary), payable to non-resident, chargeable in case of the recipients.

Mode and Form of Application

An application by a person for determination of appropriate proportion of sum chargeable in is to be made in Form 15E electronically.

It can be either under digital signature; or through electronic verification code.

Certificate by the tax officer

The AO shall examine whether the sum being paid or credited is chargeable to tax under the provisions of the Act read with the relevant Double Taxation Avoidance Agreement, if any, and if the sum is chargeable to tax, he shall proceed to determine the appropriate proportion of such sum chargeable to tax.

In case the AO is satisfied that the whole of sum would not be income chargeable in case of recipient, then he would issue certificate accordingly

The AO shall examine the application and shall issue certificate, as may consider necessary, depending upon facts of each case.

The certificate shall be valid only for the payment to non-resident named in that certificate and for such period of the previous year as may be specified in the certificate.

Factors that would be considered by AO, while granting certificate

The AO shall consider the following factors:

1) tax payable on estimated income of the previous year relevant to the assessment year;

2) tax payable on the assessed or returned/ estimated income of preceding 4 previous years;

3) existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957

4) advance tax payment, tax deducted at source and tax collected at source for the assessment year relevant to the previous year till the date of making application

Validity of certificate/ reapplication if required

Application for fresh certificate may be made, if the  assessee  so  desires,  after  the  expiry of the period of  validity of  the  earlier  certificate or within  three months before  the expiry  thereof

Details requested in Form 15E

1) Basic details of the payer

2) Basic details of the recipient

3) Details of transactions

4) Taxability under the Act

5) Taxability under the treaty

6) List of documents to be uploaded

List of Documents required along with Form 15E

1. Documents such as Relevant documents such as contract for sale of goods and/or provisions for services (if any), computation of capital gains, share purchase agreement, bank payment, details of cost of acquisition, contract note (if any), share certificate (if any), etc.

2. Details of assessed/returned/estimated income of payee of preceding four previous years, if available

3. Computation of estimated income chargeable to tax and Tax Liability of the previous year

4. Copy of Tax Residency Certificate and Form 10F

5. Documents in support of claim of applicability of sections 194LB/ 194LBA/194LC/194LD

6. Any other documents you wish to furnish in support of your claim.