Quick Summary
The Supreme Court has ruled that Indian companies cannot be compelled to deduct more than 10% TDSon payments made to foreign companies if a Double Tax Avoidance Agreement (DTAA) applies. The apex court categorically held that tax treaties override domestic tax provisions, including Section 206AA of the Income Tax Act, which mandates a 20% TDS rate when the payee does not furnish a Permanent Account Number (PAN). The ruling settles a long-running dispute between the Income Tax Department and c
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FAQ :
The Supreme Court has ruled that a Permanent Account Number (PAN) is not mandatory for foreign companies to claim benefits under a Double Tax Avoidance Agreement (DTAA).
The Supreme Court has capped the Tax Deducted at Source (TDS) at 10% for foreign payments when a DTAA applies, even if the payee does not have a PAN.
Yes, the Supreme Court has categorically held that tax treaties, such as DTAAs, override domestic tax provisions, including Section 206AA of the Income Tax Act.
The Income Tax Department previously argued that 20% TDS must be deducted if a foreign entity did not provide a PAN, contending that this invalidated DTAA benefits.
The ruling is expected to lower tax costs for Indian companies, prevent unnecessary excess withholding and refund delays, and provide greater certainty in cross-border taxation, particularly benefiting the IT, software, and consulting sectors.
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