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Tds rate under section 195

CA Soharsh Gulgulia (finance manager) (27 Points)

15 April 2014

hi,

i need to remit funds outside india(Royali) please let me know the rate of TDS need to be deducted.

as per DTAA it is 10%

as per section 195 it is 25.75

as per section 206AA it is 20%

please share relevant case law for it.

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10 Replies

Sarath.M.G (Student) (63 Points)
Replied 15 April 2014

Tax is deductibe at source u/s 195 at the rates specified in sec 195 or the rates specified in ADT(Avoidance of Double Taxation) agreements which ever is lower[sec 2(37A)(3)]

G.E.RAVI TEJA (student) (28 Points)
Replied 15 April 2014

If receiver (beneficiary) provides Tax Residency Certificate(TRC) issued by the government of his country then you can deduct TDS as stated in DTAA(at a lower rate) otherwise you have to deducted as per Sec 195 of Income tax act

CA Soharsh Gulgulia (finance manager) (27 Points)
Replied 15 April 2014

IF we have tax residency certificate and not P.E certificate.

then can we over rule section 206AA of income tax act.

SAI SASANKA (CA) (108 Points)
Replied 17 April 2014

TRC is sufficient to deduct tax as per DTAA rates, incase if TRC not provided thn tax deduction should be at higher rate.

CA Sachin D Jain (FCA, CS, DISA (ICAI)) (1474 Points)
Replied 20 April 2014

Sec 206AA starts with the word "notwithstanding anything", which gives it overriding effect over other sections of the income tax act, for e.g. sec 195, 90, etc. Hence, if PAN is not available tds has to be deducted at least at the rate of 20.60% as per sec 206AA, regardless of availability of TRC and No P.E. certificate.

CA Sachin D Jain (FCA, CS, DISA (ICAI)) (1474 Points)
Replied 20 April 2014

Contrary views are welcomed.

CA Soharsh Gulgulia (finance manager) (27 Points)
Replied 20 April 2014

hi,

please refer to circular of income tax department Circular No. 333, dated 02-04-1982 ,which state that ADT can prevail over domestic laws.

correct me if i am wrong

CA Sachin D Jain (FCA, CS, DISA (ICAI)) (1474 Points)
Replied 21 April 2014

This is a very old Circular. Further, Circular can not overrule the provisions of the Act under which it has been issued.

Hence, in my opinion, PAN is compulsory.

tank tank (Others) (24 Points)
Replied 21 April 2014

Originally posted by : Sarath.M.G
	Tax is deductibe at source u/s 195 at the rates specified in sec 195 or the rates specified in ADT(Avoidance of Double Taxation) agreements which ever is lower[sec 2(37A)(3)]

I think that is correct.

CA Sachin D Jain (FCA, CS, DISA (ICAI)) (1474 Points)
Replied 15 May 2014

Originally posted by : CA Sachin D Jain
	Sec 206AA starts with the word "notwithstanding anything", which gives it overriding effect over other sections of the income tax act, for e.g. sec 195, 90, etc. Hence, if PAN is not available tds has to be deducted at least at the rate of 20.60% as per sec 206AA, regardless of availability of TRC and No P.E. certificate.

The word "Notwithstanding anything" overrules definition provisons also. Further, Sec. 206AA was introduced in Income Tax Act, 1961 after Section 2(37A)(3), which is also one of the evidence of giving Section 206AA overruling effect over section 2(37A)(3).

Hence, again in my opinion, PAN is compulsory as per Section 206AA which overrides section 2(37A)(3).