CBDT relaxes rules for TDS claims by non-resident companies

Non-resident investors who do not provide permanent account number will no longer have to face higher tax deduction at source.

The income tax department has eased norms for non-resident investors, who will not be subjected to a higher rate of 20% tax deduction at source or TDS on their interest earnings, royalty or technical fee if they furnish some personal details and tax residency certificate from their home country and a few other easily available documents.

“Provisions of Sec 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset,” the Central Board of Direct Taxes said in a notification. Section 206AA of I-T Act provides that if an investor does not have permanent account number or PAN, he or she will be liable to withholding taxes on payments at the rate of 20% or as per tax treaty with the country where investor is resident, whichever is higher.


This clause forced non-resident investors to seek PAN, making investment process difficult.

Under the new rules 37BC, investors will instead need to provide their personal details such as e-mail and contact number, residential address and tax residency certificate from the government of their home country.

In case the country does not provide tax residency certificate, the investor can provide tax identification number or any other unique identification number issued by the country of residence. This will spare investors the hassles of securing PAN in India and attendant compliance that comes with having this number.

Finance minister Arun Jaitley had said in his budget speech in February that some concession would be provided in this regard. “Non-residents without PAN are currently subjected to a higher rate of TDS. It is proposed to amend the relevant provision to provide that on furnishing of alternative documents, the higher rate will not apply,” Jaitley had said, without spelling out the details.

Source: The Economic Times

Leave a Reply

Your email address will not be published. Required fields are marked *