TDS to be deducted on Foreign Remmittance.

This query is : Resolved

Pradnya Manohar Madhavi (Querist)
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17 November 2010 As per the provisions of section 206AA of IT Act if payee does not funish PAN then TDS to be deducted @20% or relevant TDS rate whichever is higher.

As per provisions of section 91 of IT Act in case of payment to non-resident, rate specified in DTAA or rate of Income Tax Act whichever is benificial to payee is to be applied.

Taking into consideration above provisions of Income Tax Act please answer the following Querry.

An assesee wants to paid amount to entity in USA having no any Permanant Establishment in India also do not have PAN in India.The nature of payment is professional fees.As per the DTAA Professional fees will be Taxable in USA for Payee.Accordingly Indian payer need not to deduct the Tax while remmittance of the amount.
But as per the insertion of New Provisions of 206AA if USA Payee does not have PAN in India higther rate is to be deducted i.e 20%

So in this case does the 206AA overrides the provisions of section 91 or vise a versa i.e whether to deduct the Tax @20% or not to deduct the Tax.

Please give details of any caselaw available for the same case.

CA. VIKAS GUPTA

CA. VIKAS GUPTA (Expert)
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17 November 2010 Hi,
Provisions of section 206AA also apply to non resident hence if any non resident does'nt have PAN in India, TDS will be deducted @ 20% or applicable rate whichever is higher.

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CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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18 December 2010 Sec 206AA starts with words "Notwithstanding anything contained in any other provisions of this Act",hence it overrules the provisions of sec. 91 to that extent.
The constitutional and legal validity of the same is yet to be tested by courts, hence till that moment you have to abide by that provision.

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