1.
Section 195 of the Income Tax Act pertains to the
deduction of tax at source (TDS) on payments made to non-residents (including
foreign companies) in India. It outlines the obligations of the person
responsible for making the payment to deduct tax and remit it to the Indian
government
2.
As per section 206AA Where any person is entitled to
receive any income on which tax is deductible at source, he is required to
furnish his PAN to the diductor. In case the PAN is not furnished, the tax
shall be deducted at a higher rates.
3.
As per
Section 206AA, if the recipient fails to furnish his PAN to the diductor then
tax shall be deducted at the higher of
the following rates:
(a) At the rate specified in the relevant
provision
(b) At the rate or rates in force
(c) At the rate of 20%
4.
Further where the deductee is a non-resident,
the provision of section 206AA shall not be applicable in certain transactions.
5.
On specified income - By virtue of Rule 37BC, a
diductee, being a non-resident person
(including a foreign company), is not
required to furnish his PAN to the deductor if he receives the following
income:
a) Interest
(b) Royalty
(c) Fees for technical services
(d) Dividend
(e) Payments for transfer of any capital
asset.
6.
If the payment does not fall under the above
category then check
1.
Whether the
vendor have a PE in India, if so
a with holding tax @40% should be
deducted while making the payment.
2.
If vendor has no PE in India then check
for the following :
a.
PAN
b.
Valid TRC
c.
Form 10F
3.
If any
one of the above documents has been furnished by the Diductee then, No withholding
tax is required to be deducted.
4.
If the
deductee could not furnish any of the specified documents, a withholding tax
@20% is required to be deducted as per sec 206AA.
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