CIRCULAR NO. 07/2011 [F.NO. 500/135/2007-FTD-I], DATED 27-9-2011
The Board had issued Circular No. 7/2007, dated 23-10-2007 laying down the procedure for refund of tax deducted at source under section 195 of the Income-tax Act, 1961 to the person deducting tax at source from the payment to a non-resident.
2. Para 2 of the Circular lists the circumstances under which the provisions of the said Circular shall apply. This paragraph does not cover a situation where the tax is deducted at a rate prescribed in the relevant DTAA which is higher than the rate prescribed in the Income-tax Act, 1961. Since the law requires deduction of tax at a rate prescribed in the relevant DTAA or under the Income-tax Act, whichever is lower, there is a possibility that in such cases, excess tax is deducted relying on the provisions of the relevant DTAA. Since in these cases as well, the resident deductor is put to genuine hardship, the Board has decided that the provisions of Circular No. 7/2007, dated 23-10-2007 shall also apply to those cases where deduction of tax at a higher rate under the relevant DTAA has been made while a lower rate is prescribed under the domestic law.
3. Circular No. 7/2007, dated 23-10-2007 stands modified to this extent.
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