Online filing of application seeking a determination of tax to be deducted at source on payment to non-residents

Under sub-section (2) of section 195 of the Act, if a person who is responsible for paying any sum to a non-resident which is chargeable to tax under the Act (other than salary) considers that the whole of such sum would not be income chargeable in the case of the recipient, he can make an application to the Assessing Officer to determine the appropriate proportion of such sum chargeable. This provision is used by a person making payment to a non-resident to obtain a certificate/order from the Assessing Officer for lower or nil withholding tax. However, the process is currently manual. In order to use technology to streamline the process, which will not only reduce the time for processing of such applications, but shall also help tax administration in monitoring such payments, it is proposed to amend the provisions of this section to allow for prescribing the form and manner of application to the Assessing Officer and also for the manner of determination of appropriate portion of sum chargeable to tax by the Assessing Officer.

A similar amendment is also proposed to be made in sub-section (7) of section 195 which are applicable to a specified class of persons or cases.

These amendments will take effect from 1st November, 2019.

Also check out how to pay online TDS payment through challan ITNS 281.

[Clause 47]

Extract of Clause 47 of Finance Bill 2019

47. Amendment of section 195.

In section 195 of the Income-tax Act, with effect from the 1st day of November, 2019,––

(a) in sub-section (2), for the words “to the Assessing Officer to determine, by general or special order”, the words “in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed” shall be substituted;

(b) in sub-section (7), for the words “to the Assessing Officer to determine, by general or special order”, the words “in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed” shall be substituted.

Note on Clause 47 of Finance Bill 2019

Clause 47 of the Bill seeks to amend section 195 of the Income-tax Act relating to other sums.

Sub-section (2) of the said section provides that where the person responsible for paying such 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 the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted only on that proportion of the sum which is so chargeable.

It is proposed to amend the said sub-section so as to empower the Board to prescribe the form and manner of making such application and the manner of determining the appropriate proportion of such sum chargeable.

Sub-section (7) of the said section empowers the Board to specify a class of persons or cases, where 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 make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of sum chargeable to tax.

It is proposed to amend the said sub-section so as to empower the Board to prescribe the form and manner of making such application and the manner of determining the appropriate proportion of such sum chargeable to tax.

These amendments will take effect from 1st November, 2019.

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