PAN for foreign nationals..?

TDS 2590 views 5 replies

Rajeesh G

Asst. Accounts Manager

51 Points Joined December 2009

Hello..All...

Could any of you clarify as to the necessity for obtaining PAN for every TDS transactions which may consequentially include the Foreign Nationals as well..(..?..) to whom any payments have been made for, say, professional consultancy services/technical knowledge inputs etc..(which can come under the purview of the Income Tax Act, of course..)?

I have just heared that wef April 1st 2010 it has been made compulsory that the deductor should provide the PAN of every deductee, be it RESIDENT or NON-RESIDENT..failing which can attract the penalty/TDS deduction @ 20%..?

I would like to know whether the same is applicable for Foreign Nationals as well..?

Replies (5)

Shudhanshu Agrawal

Business

2570 Points Joined May 2008

what u have heard is totally right and i think u should ask foreigners to apply for the PAN otherwise u will also face the problem of validation of TDS return

CA PALLAVI VOHRA

Learner

140 Points Joined June 2009

Rajeesh,

I will like to say that yes quoting of PAN will be compulsory otherwise tax will be deducted at Higher Rates. But I think for Non Residents there is no such amendment.One reason I m having to support this is whenever we make payment to non resident we have to fill up a Form 15CA with Income tax Department and its reference number is to be given to Bank before any remittance is made to them.Moreover the payer is responsible for Payment of tax to the Govt. So it is easy for Income Tax Department to search out cases of non payment of taxes.Further there is no such provision that such payments will be disallowed due to non availability of PAN , the only consequence can be deduction of Tax at Higher rates for which the payer can not be imposed with any penalty,if he deducts proper taxes and deposit the TDS in time. Pls correct me if i m wrong.

CA. Gurdeep Singh Chawla

C A

7080 Points Joined June 2007

Agree with Ms Pallavi

Sunil

Trader

2616 Points Joined August 2009

Quoting of PAN was needed if one could apply beneficial rates for TDS as per DTAA. However, after the recent judgment of Karnataka High Court in Samsung Case, any remittance made has to be at rate specified for transaction. If no rate is specified then 30% if payee is Individual and 40% if non domestic company. This is whether the income is taxable or not. Payee has to furnish form u/s 197 or file returns and claim refund. Therefore, for the deductor it makes no difference if there is a PAN or not. However a payee will have to apply for PAN to file return and claim refund if the income is not taxable or to apply for certificate u/s 197.

In this judgement it is clear that tax has to be deducted even on import of goods even if non resident payee does not have PE. Deductor is not to determine applicability of tax or not. He has to deduct and only the deductee (payee) can claim refunds using benefit of DTAA provisions.

amit mehta

Service

21 Points Joined July 2008

Dear Rajneesh,

Your fear is correct. Dept wants all non-resident shouls also have PAN. However, it is not appearing to be full proof. So let us wait for some time.

Dear Pallavi,

Penalty are very severe and clebbed with short tax deduction as well as interest. So better we should not take it lightly.

Dear Sunil,

Karnatka High court dedcision is applicable, however this decision will most likely will be ignored by the other honurable corts of the country. If the decision is correct, the question is why dept came with the new procedure of form 15CA & CB just few months back.

LASTLY, No doubt we can apply the rates of DTAA (which is 10% in most cases) - However the question is whether the dept will insist for PAN in these cases (applying DTAA) rate also or not.

I iwll request to please wait and watch.

Thanks
Amit MEHTA