Section 94A Special measures in respect of transactions with persons located in notified jurisdictional area

Issue/Justification

One of the tax consequences of a country or area being notified as NJA is that payments to persons located in that NJA would be subject to a higher withholding @ 30%. The relevant provision which provides for this implication i.e., section 94A(5), would be applicable notwithstanding anything to the contrary contained in the Act. Section 206AA which provides for higher withholding @ 20% in absence of PAN of payee is also applicable not withstanding anything to the contrary contained in the Act.

Though the intent appears to be that section 94A would override section 206AA, there may be some difficulties in interpretation.

Suggestion by ICAI

Section 94A and/or section 206AA may be suitably amended to clarify that section 94A would prevail in case tax is to be deducted with respect to any payment to a person located in a NJA.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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