Recent Applicability of PAN to foriegn co for TDS u/s 195

TDS 3997 views 10 replies

Rahul Gupta

Project Controller ACA MBA(Fin.)

8019 Points Joined July 2007

Hello All,

Following is the Amendment recently made in the union Budget 2010.

"In order to strengthen the PAN mechanism, it is proposed to make amendments in the Income Tax Act to provide that any person whose receipts are subject to deduction of tax at source i.e., the deductee, shall mandatorily furnish his PAN to the deductor failing which the deductor shall deduct tax at source at higher of the following rates:

(i) the rate prescribed in the Act;

(ii) at the rate in force i.e., the rate mentioned in the Finance Act; or

(iii) at the rate of 20 percent

The above provisions will also apply in cases where the taxpayer files a declaration in form 15G or 15H (u/s 197A) but does not provide his PAN. Further, no certificate under section 197 will be granted by the Assessing Officer unless the application contains the PAN of the applicant."

My discussion topic is the applicability of the above provisions to a Foreign Company. Is this provision make the Foreign Co. to cumpulsory take PAN in order to avoid the TDS @ 20%.? If so, what will be happen in case the taxes are more than 20% i.e in some cases the TDS to be dedcuted is 40%.?

There is a query by one of our members in the Expert section. Some of us give our opinions on it and also have some discussion on it. The link is given below for the answers given by the Experts.

I am postiong it here in case any of you can throw more light on it.

/experts/section-195-389865.asp

Replies (10)

Rahul Gupta

Project Controller ACA MBA(Fin.)

8019 Points Joined July 2007

My point of view is that the Foreign co. has to take PAN in either case, otherwise the maximum rate is applicable. In case, DTAA provides for rate above 20% then also the above provison applies.

Regards

CA Archana

Mamager Finance & Accounts

365 Points Joined December 2008

Yes,and it will be a difficult situation for the persons who r having FD etc with banks and who dont have any other source of income so they are not having PAN no.Now every such person will be required have Pan No.

CS Richa Sharma

company secretary

2243 Points Joined April 2008

Please see this link for clarification point of view.

Hope this will help u.

https://www.facebook.com/note.php?note_id=107213682648725

Shudhanshu Agrawal

Business

2570 Points Joined May 2008

According to me foreign company need to have PAN no as in its case the amont which is received by it will be taxable in India......and due to this they need to have PAN.

In case of TDS maximum of 20% or TDS rate will be applicable.

Guest

if tds is to be deducted 40% then no need of pan arise.the amendment says minimum tds of 20% if pan is not available.if rate is higher than 20%,then at highe rate tax to be deduted.this amendment affect those persons who falls under tds rate of 1% or 2%.

Rahul Gupta

Project Controller ACA MBA(Fin.)

8019 Points Joined July 2007

Agreed Mr Rajiv with what you said that this will effect persons whose TDS dedcution rate is below 20%.

But in case, the person is charged higher rate than 20% and he wants to avail benefit u/s 197 of avialing lower TDS rate, then PAN is mandatory otherwise he will not get the Certificate from AO.

Thnaks a lot for giving your point of view.

Rahul Gupta

Project Controller ACA MBA(Fin.)

8019 Points Joined July 2007

Mr Sudhanshu sorry for late reply

What you are saying is correct in the scenario, if the income received by a foreign co is taxable in India, but in case its inome is not taxable in Inda, then its not compulsory that Foreign co will have PAN no. In such case, the above proviisons will apply.

Regards

Guest

mr rahul here is link to audio which deals with taxability of non residents and also why this amendment of 20% comes to place.also in case income is not taxable in india but if you are not sure whether it si taxable ot not ,then you have to make application to assessing officer u/s 195(2) to estimate the tds liability falling which it will be disallowed.

https://www.bcasonline.org/AudioGallery/TPOstwal%2012May2010.mp3

hope you find it very interesting and benefit u a lot since this audio also deals with latest aspect of form 15cb to be certified by ca .

Rahul Gupta

Project Controller ACA MBA(Fin.)

8019 Points Joined July 2007

Thanks a lot Mr Rajiv for participating and sharing your views and contibution to the discussion. I hope many people in future can get the answers from here. The audio provided by you is really listenable. Thanks a lot for sharing.

Also, find a link of an article wriiten by senior partner of SS Kothari Mehta & Co. on this topic. I think it will also help many people concerned with this topic.

https://www.business-standard.com/india/news/non-residents-must-obtain-pan-for-proper-tds/390803/

Regards