Draft Income Tax Rule 216, 217 – Application for TAN Allotment u/s 397(1)(a); Conditions for Non-Application of Higher TDS for Non-Residents u/s 397(2)(c)
Rules 216 and 217 of the Draft Income-tax Rules, 2026 lay down procedures for allotment of Tax Deduction and Collection Account Number (TAN) and conditions for non-application of higher TDS rates in certain cases involving non-residents. Rule 216 requires applications for TAN under section 397(1)(a) to be made in Form No. 134 for government entities and Form No. 135 for non-government entities, or through a notified common application form. The application must be filed before deduction or collection of tax, or within thirty days from the end of the month in which tax was deducted or collected. It must be submitted to the designated officer as specified by the Director General of Income-tax (Systems) and accompanied by prescribed proof of identity, address, and incorporation details. “Government entity” excludes companies and statutory or autonomous bodies. Rule 217 provides that higher TDS under section 397(2)(b)(i) shall not apply to certain non-residents (including foreign companies) lacking PAN, in respect of specified payments such as interest, royalty, fees for technical services, dividend, and capital gains, provided prescribed details and residency documents are furnished to the deductor. The higher rate also does not apply where the non-resident is not required to obtain PAN under section 262 and relevant rules.
Extract of Rule No. 216, 217 of Draft Income-tax Rules, 2026
Rule 216
Application for allotment of a tax deduction and collection account number.:
(1) An application under section 397(1)(a) for the allotment of a tax deduction and collection account number shall be made in––
(a) Form No. 134, in case of a government entity;
(b) Form No. 135, in case of an entity other than a government entity.
(2) An application for allotment of a tax deduction and collection account number may also be made through a common application form as notified by the Central Government in the Official Gazette, by such persons as mentioned in the said notification.
(3) For the purposes of sub-rule (1) and (2), the Director General of Income-tax (Systems) shall specify the procedures, guidelines, standards and formats along with procedure for safe and secure transmission of such forms and formats in relation to furnishing of application for allotment of tax deduction and collection account number.
(4) An application referred to in sub-rule (1) or (2) shall be made to such officer to whom function of allotment of tax deduction and collection account number under section 397(1)(a) has been assigned by the Director General of Income-tax (Systems).
(5) The application referred to in sub-rule (1) or (2) shall be made––
(a) prior to the deduction or collection of tax; and
(b) where it has not been so made, then within thirty days from the end of the month in which the tax was deducted or collected, as the case may be.
(6) The application referred to in sub-rule (1) shall be accompanied by the documents mentioned in column (D) of the Table under sub-rule (8) of rule 158, as proof of identity, address and date of birth or date of incorporation, as the case may be, in respect of an applicant mentioned in column (B) of said table.
(7) For the purposes of the rule, “government entity” shall mean––
(a) an entity of the Central Government;
(b) an entity of the State Government;
(c) any local authority (Central Government);
(d) any local authority (State Government),
but shall not include any company or any statutory or autonomous body constituted by any Act of the Central or State Government.
Rule 217
Conditions under section 397(2)(c) for non-application of deduction of tax at higher rate in case of non-residents
(1) The provisions of section 397(2)(b)(i) shall not apply to a non-resident, not being a
company, or a foreign company (‘the deductee’), where such deductee does not have permanent account number, in respect of payments in the nature of interest, royalty, fees for technical services, dividend and payments on transfer of any capital asset, if the deductee furnishes the details and the documents specified in sub-rule (2) to the deductor.
(2) The following details and documents referred to in sub-rule (1) shall be the following, namely:-
(a) name, e-mail id, contact number;
(b) address in the country or specified territory outside India of which the deductee is a resident;
(c) 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;
(d) 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.
(3) The provisions of section 397(2)(b)(i) shall also not apply in respect of payments made to a person being a non-resident, not being a company, or a foreign company, if such person is not required to apply for PAN in view of the provisions of section 262 and rules prescribed therein.
