Draft Income Tax Rule 214 – Application by the payer for grant of certificate under section 395(2) or 400(3) for determination of appropriate proportion of sum (other than Salary), payable to nonresident, chargeable in case of the recipients
Rule 214 of the Draft Income-tax Rules, 2026 provides the procedure for a payer to apply for a certificate under section 395(2) or 400(3) to determine the appropriate proportion of a sum (other than salary) payable to a non-resident that is chargeable to tax. The application must be made in Form No. 129. Upon receipt, the Assessing Officer examines whether the payment to the non-resident is chargeable to tax under the Act read with the applicable Double Taxation Avoidance Agreement, if any. Where only a portion of the sum is taxable, the Assessing Officer determines the appropriate proportion chargeable and issues a certificate for tax deduction under section 393(2) (Table: Sl. No. 17). In making this determination, the Assessing Officer considers the recipient’s estimated tax liability for the relevant tax year, tax payable on assessed, returned, or estimated income for the preceding four tax years, existing liabilities under the Act and the Income-tax Act, 1961, and advance tax or TDS/TCS credits up to the date of application or issuance. The certificate is valid only for the specified non-resident and period mentioned therein, unless cancelled earlier. A fresh application may be filed after expiry or within three months prior to expiry of the earlier certificate.
Extract of Rule No. 214 of Draft Income-tax Rules, 2026
Rule 214
Application by the payer for grant of certificate under section 395(2) or 400(3) for determination of appropriate proportion of sum (other than Salary), payable to nonresident, chargeable in case of the recipients
(1) An application by a person for determination of appropriate proportion of sum chargeable in the case of non-resident recipient under section 395(2) or section 400(3) shall be made in Form No. 129.
(2) The Assessing Officer shall examine whether the sum being paid or credited by such person to the non-resident is chargeable to tax under the provisions of the Act read with the relevant Double Taxation Avoidance Agreement, if any, and –
(a) where the whole of such sum would not be the income chargeable in case of the non-resident recipient, he shall proceed to determine the appropriate proportion of such sum chargeable to tax; and
(b) issue a certificate thereof for tax deduction under section 393(2) (Table: Sl. No. 17).
(3) The Assessing Officer shall issue the certificate specified in sub-rule (2) after taking into consideration the following in relation to the recipient: ¬—
(a) tax payable on estimated income of the relevant tax year;
(b) tax payable on the assessed or returned or estimated income, as the case may be, of preceding four tax years;
(c) existing liability under the Act, and the Income-tax Act, 1961(43 of 1961)
(d) advance tax payment, tax deducted at source and tax collected at source for the relevant tax year till the date of making application or till the date of issuance of certificate.
(4) The certificate shall be valid only for the payment to non-resident named therein and for such period of the tax year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.
(5) An application for a fresh certificate may be made by the assessee after the expiry of the period of validity of the earlier certificate or within three months before the expiry thereof.
