Section 195 and budget 2012-13.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2012 Dear Sir,

It has been proposed to amend section 195 of Income Tax Act in the proposed budget 2012-13. Section 195 has been amended to cast an obligation to deduct tax at source on payment to non-residents whether or not such resident has a residence or a place of business or business connection or any other presence in India.

Does it mean that all the payments to non residents whether income is earned by such non-resident in India or not will be subject to deduction of tax at source once the proposal is passed in the parliament. Whether all the transactions are covered or only the transactions by which profit is earned in India

Will appreciate your view on this.

Kind Regards

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 May 2012 The insertion of Explanation 2 in Section 195 is clarificatory in nature as the payer has been referred to as a "person" in the present act, and person always meant a resident as well as a non resident-both.

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However, by inserting a new sub-section (7) to Section 195, duty is being casted upon the payer for making an application to the AO for determining whether the sum payable is chargeable to tax or not, or, if it is chargeable to tax then at what rate Tax has to be deducted.
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So, in case of sums not chargeable to tax also, AO's general or special order will be required as I understood.
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