TDS Payment 2020: Soon, new rule and Form for these payers by CBDT; Check details

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Updated: January 1, 2020 5:14:50 PM

TDS on payments: The Section 195 of the Act was amended by Finance (No.2) Act 2019 "in order to streamline the process for making an application by the deductor and to reduce the human interface

TDS on Cash paymentTDS on Cash payment: New Form for non-residents soon.

TDS on payments for non-residents: The Central Board of Direct Taxes (CBDT) has invited comments from stakeholders on the proposed Form 15E, which is to be introduced to operationalise section 195 (2) of the Income Tax Act. The general public can send comments and suggestions on the proposed form within 15 days. The CBDT has proposed to amend Income Tax Rules 1962 to insert new rule 29BA and Form 15E to give effect to the amendment in Section 195 of the Act vide Finance (N.2) Act of 2019.  Section 195 of the Income Tax Act relates to levy of tax deduction at source (TDS) on any sum chargeable to tax and which is paid to a non-resident, not being a company, or to a foreign company.

Before the amendment, sub-section (2) of the said Section provided that “where the person responsible for paying such sum chargeable under the Act to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate of such sum so chargeable and upon such determination, tax shall be deducted only on that proportion of the sum which is so chargeable,” the CBDT said in an Office Memorandum.

However, no format was prescribed for making the application under sub-section (2) of section 195. Hence, the deductor had to write an application on plain paper and physically submit it to the Assessing Officer. The AO then issues a certificate determining by general or special order, the appropriate proportion of such sum so chargeable to TDS under section (1) of section 195 of the Act. According to CBDT, there are also no standard operating procedures in respect of processing and disposal of the application under the said sub-section. This increases uncertainty and causes inconvenience to deductors.

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“Further, sub-section (7) of section 195 also provided that the Government may specify a class of persons or cases, where the deductor who is responsible for paying to a non-resident. not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (I) on that proportion of the sum which is so chargeable. However, no format was prescribed for making such application and neither is any standard operating procedures specified in respect of processing and disposal of the application,” the CBDT said.

Amendment to Section 195

The Section 195 of the Act was amended by Finance (No.2) Act 2019 “in order to streamline the process for making an application by the deductor and to reduce the human interface.” The new amended section empowers the CBDT to prescribe the form and manner of filing of application under sub-section (2) to determine the appropriate proportion of such sum so chargeable and upon determination tax to be deducted as per sub-section (I) of section 195 on that proportion only.

“Further sub-section (7) of section 195 was amended to provide that the Government may specify a class of persons or cases, where the deductor who is responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application to the Assessing Officer in such form and manner and Assessing officer to determine in such manner as may be prescribed the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (I),” the Board said.

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