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Sec 206 AA vs DTAA

CA. Arpita Singhal (Partner) (100 Points)

05 May 2011

What shall be applicable rates while issuing 15 CB Certificate when the PAN is not available...

Should it be 20% or rate as per DTAA whichever is favorable to assessee or otherwise.

On the reading of Section 206AA & as per the CBDT press note issued on Januaruy 2010 I assess it has to be otherwise ie. 20% would like to be updated by the experts.

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2 Replies

gaurav behal (CA-IPCC) (217 Points)
Replied 05 May 2011

while issuing 15CB for the payment, if the remitee has not the PAN then the tax should be deducted at the rate of 20% due to non availability of PAN. the provision of DTAA which is favourable to asessee is not taken.

i hope it is clear..

Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 24 May 2011

There is a bit confusion as to if S 206AA can override the benefits of DTAA with various countries or not. Untill any change takes place in S 206AA, it is advisable not to give the benefit of DTAA as the benefit of DTAA is available from S 90 only and S 206AA overrides all other provisons. Hence deduct tax @ 20%.

Further problem will arise in case of Non Residents being Individuals (DTAA - Article 14 or 15) where actually no tax is to be deducted as per DTAA basing on there stay in India but Inome Tax Act charges tax as it is technical services and applying S 206 AA it shall become 20%.

Finally hard to digest but S 206AA shall override other provisions.