Dear Experts
A private company will be paying salary to its MD who is a non - resident.
Will the tds be under section 192 @ 20% (as the individual does not have PAN in India) ? Section 195 is not applicable to salary.
There is no DTAA between India and the country to which the foreign national belongs. Had there been a DTAA, would there be exemption under section 192 on the premise that salary would be taxable in the country of residence ?
Please guide.
Regards,
The salary paid by an Indian private company to its Managing Director (MD) who is a non-resident must have Tax Deducted at Source (TDS) under section 192 of the Income Tax Act, not section 195, as section 195 applies to payments other than salaries to non-residents. When the non-resident MD does not have a PAN, TDS under section 192 should generally be at the higher rate of 20% as per section 206AA, unless lower rates apply under certain circumstances.
Section 192 covers TDS on salary payments, including to non-residents.
If the MD lacks a PAN, then as per section 206AA, TDS is to be done at 20% or the specified rate, whichever is higher.
Section 195 does not apply to salary payments, so it cannot be used to determine TDS on salary to a non-resident MD.
No DTAA: Without a Double Taxation Avoidance Agreement (DTAA) with the MD’s country of residence, salary income becomes taxable in India and TDS provisions fully apply.
If DTAA existed: If there were a DTAA, its relevant article (often "Dependent Personal Services" or "Income from Employment") may specify that salary is taxable only in the country of residence unless employment is exercised in India. In such cases, if the salary is not taxable in India due to the DTAA, relief under section 192 could be claimed, but TDS procedures must comply with conditions for DTAA application:
The employee might need a Tax Residency Certificate (TRC) and PAN or specified documents.
Section 206AA generally overrides and mandates 20% TDS where the non-resident does not furnish PAN, even if a DTAA applies, unless prescribed documentation (such as TRC) is provided to support the lower withholding.
Dear Sir
Many thanks for such insightful discussion.
May I kindly ask how to report this deduction in quarterly 24Q. Means with what PAN.
Is it NOTAP1234Q,
Or we do not show this deduction in 24Q.
Regards,
PAN Entry in 24Q: If the employee does not have a PAN, a structurally valid placeholder such as “PANNOTAVBL” or “NOTAP1234Q” should be reported in the PAN field as per the format allowed by the department.
Sir
Thanks again.
May I kindly ask are we required to issue Form 15CA Part B and need to obtain 15CB from a practising CA for deduction of tax at source under section 192.
Or there is no requirement of 15CA/15CB as section 195 is not attracted.
Regards,
“No information is required to be furnished for payments that are not chargeable to tax under the Act, or for specified list of payments, which includes ‘Remittance towards salary’.”
Hence, salary payments to non-residents — even if chargeable to tax — are excluded from the requirement of furnishing Form 15CA/15CB.
Remittance of salary to a non-resident does not require Form 15CA/15CB, as clarified by the Central Board of Direct Taxes (CBDT) through various FAQs and guidance.
Dear Sir
Thanks,
Banks are insisting for 15CA/15CB. They do not wish to listen or understand.
Strangely, different banks are giving diferent purpose codes too.
Can you please provide any source for CBDT FAQs/Guidelines please for taking up the matter with banks?
In the list herein, could not find the item under rule 37BB(3). https://incometaxindia.gov.in/pages/rules/income-tax-rules-1962.aspx?key=37bb+(3)
Regards,
Refer:
Remittance of salary to a non-resident does not require Form 15CA/15CB, as clarified by the
Central Board of Direct Taxes (CBDT) through various FAQs and guidance.
You need to file form 15CA with part D...
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