Order u/s 195(3)

This query is : Resolved 

09 April 2010

A "NIL" tds certificate has been provided to us for the year 2010-11 towards receipt of commission from us by one of our assesse. But the certificate has been issued u/s 195(3)of the Income tax act. While Sec 195 deals with deducting TDS on payments to NRI. The Company is a Foreign Bank having its branches across India.

Kindly advice for deducting the TDS on commission u/s 194H whether order section 195(3) is valid.

taxindiaconnect (Expert)
09 April 2010

A bank is assessble to tax in country in which it is tax resident i.e. where it is incorporated. The income of it's branches is clubbed with the income of the bank in the country of residence of HO. Thus the branch of a Foreign bank in India in only a permanent establishment of the foreign bank. Under section 195(3) the a non resident can apply for the tax exepemption certificate. Since the bank is a foreign bank, it has been treated a foreign resident for tax purposes and certificate accodingly been issued by the tax authorities.

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