Tds for non-residents

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Pooja Gupta (Querist)
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04 January 2016 What will be the Tds rate for a non-resident,if the rate mentioned in DTAA is 10% and he is not holding PAN in India? Whether Sec. 206AA containing TDS rate 20% will override the DTAA rate?

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 January 2016 Yes, Basic Tax rate 20%+ Surcharge applicable (if payment exceeds 1 Rs. crore) + education cess

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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04 January 2016 As per Section 90(2) provisions of the Act ( means Section 206AA) shall apply only when it is more beneficial to the assessee than the respective DTAAs. Section 90 is a specific provision for double taxation relief. Section 206AA being a general section can not override Section 90(2) So, for TDS purposes DTAA rate can be followed.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 January 2016 This matter has not been clarified the CBDT or by any explanation thereafter by the IT Act. The IT department is scrutinizing the cases where PAN and Tax Residency Certificate (TRC) are not available. To claim a DTAA benefit, TRC is required to be submitted to the deductor. In this matter, any reliance on expert opinions by the assessee / deductor will be at litigation. The deductor has to exercise his diligence very carefully.

See the below decisions of Bangalore and Pune ITAT:
The decisions given by the Bangalore ITAT, in case of Bosch Ltd. (141 ITD 38) in the year 2012 confirming Section 206AA ability to Override the provisions of the Entire Income Tax Act.

The similar matter came to be decided recently before a Pune bench of ITAT in case of Serum Institute (170 TTJ 119) wherein what was to be decided was whether a resident who has to deduct the TDS of non resident u/s 195 who does not have PAN can deduct tax at the rate prescribed in DTAA if the same is beneficial applying the provisions of Section 90(2) of the Act or whether Section 206 AA would apply which states that TDS is to be deducted at rates in force or rates specified in relevant provisions or 20% whichever is higher.

CA Pallav Singhania

CA Pallav Singhania (Expert)
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04 January 2016 Well explained by the Expert,
The rate of TDS is the rates which is in force under chapter. Incase payee not having valid PAN, then TDS rate as per rate prescribed chapter XVIIB or 20% whichever is higher will apply.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 January 2016 See also the and reply by Mr. Ankit with excellent flow chart at
https://www.caclubindia.com/forum/tds-on-payment-to-non-residents-345194.asp

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