CBDT has inserted new Rule 29BA and Form 15E in the Income Tax Rules, 1962 for determining the sum chargeable to tax for the purpose of TDS on payments to non-residents as per section 195(2) of the Income Tax Act, 1961 (“Act”) vide Notification No. 18/2021 (G.S.R. 194(E)) dated 16.03.2021 and Income-tax (5th Amendment) Rules, 2021. This is the facility provided by the Income Tax department for online filing of applications seeking a determination of tax to be deducted at source on payment to non-residents.
Finance (No. 2) Act, 2019 has amended the provisions of section 195(2) to provide for filing of online applications for a lower or nil TDS certificate under section 195. After the amendment, a non-resident can apply online in electronic form for a lower or nil TDS certificate under section 195 from the sum payable to a non-resident. This was subject to the rules to be prescribed by the CBDT in this regard.
Hence, Section 195(2) of the Act empowers the Board to prescribe the form and manner in which online application can be made to the Assessing Officer to determine the appropriate proportion of sum chargeable to tax on which tax is required to be deducted by the deductor. Once such sum or income is determined after the application is filed online in the prescribed form, tax shall be deducted under section 195(1) only on that proportion of the sum which is chargeable to tax.
Prior to the amendment, under section 195(2) of the Act, if a person who is responsible for paying any sum to a non-resident which is chargeable to tax under the Act (other than salary) considers that the whole of such sum would not be income chargeable in the case of the recipient, he can make an application to the Assessing Officer to determine the appropriate proportion of such sum chargeable. This provision is used by a person making payment to a non-resident to obtain a certificate/order from the Assessing Officer for lower or nil withholding tax.
The process was manual. In order to use technology to streamline the process, which will not only reduce the time for processing of such applications but shall also help tax administration in monitoring such payments, Finance (No. 2) Act, 2019 amended the provisions of this section to allow for prescribing the form and manner of application to the Assessing Officer and also for the manner of determination of the appropriate portion of sum chargeable to tax by the Assessing Officer.
A similar amendment was also made in section 195(7) which is applicable to a specified class of persons or cases.
These amendments were made effective from 1st November 2019. However, the Notification issued on 16.03.2021 provides for the date of applicability of Rule 29BA and Form 15E as 1st April 2021.
Notification No. 18/2021 provides for the followings-
1. This notification is issued under section 195(2) or section 195(7) of the Act.
2. These provisions shall come into effect from 1st day of April, 2021.
3. A new Rule 29BA is inserted in the Income Tax Rules to provide for filing of online application for grant of certificate for determination of the appropriate proportion of sum (other than Salary), payable to a non-resident, chargeable to tax.
4. The application shall be made in Form 15E electronically.
5. Form 15E shall be verified by digital signature or through electronic verification code (EVC).
6. The Assessing Officer after examining the application so made in Form 15E, shall determine the sum that is chargeable to tax in India.
7. The Assessing Officer shall be required to issue a certificate mentioning the appropriate proportion of such sum chargeable to tax.
8. The Assessing Officer shall take into consideration the followings while examining the application-
(i) tax payable on estimated income for the previous year in which application is filed
(ii) tax payable on preceding four previous year’s income
(iii) outstanding demand under the Income Tax Act/Wealth Tax Act
(iv) advance tax, TDS/TCS for the previous year in which application is filed
9. The certificate shall be valid only for the payment to non-resident named therein and for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.
10. The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall prescribe the procedures, formats and standards for online filing of the application in Form 15E.
Read the full text of Notification No. 18/2021 dated 16.03.2021 on Furnishing Application in Form 15E under Rule 29BA
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 16th March, 2021
(INCOME-TAX)
G.S.R. 194(E).—In exercise of the powers conferred by section 195 read with section 295 of the Income- tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby, makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. Short title and commencement.- (1) These rules may be called the Income-tax (5th Amendment) Rules,2021.
(2) They shall come into force with effect from the 1st day of April, 2021.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), after rule 29B, the following rule shall be inserted, namely, —
“29BA. Application for grant of certificate for determination of appropriate proportion of sum (other than Salary), payable to non-resident, chargeable in case of the recipients.
(1) An application by a person for determination of appropriate proportion of sum chargeable in the case of non-resident recipient under sub-section (2) or sub-section (7) of section 195 shall be made in Form 15E electronically,-
(i) under digital signature; or
(ii) through electronic verification code.
(2) The Assessing Officer, in order to satisfy himself, shall examine whether the sum being paid or credited is chargeable to tax under the provisions of the Act read with the relevant Double Taxation Avoidance Agreement, if any, and if the sum is chargeable to tax he shall proceed to determine the appropriate proportion of such sum chargeable to tax.
(3) The Assessing Officer shall examine the application and on being satisfied that the whole of such sum would not be the income chargeable in case of the recipient, may issue a certificate determining appropriate proportion of such sum chargeable under the provision of this Act, for the purposes of tax deduction under sub-section (1) of section 195.
(4) While examining the application, the Assessing Officer shall also take into consideration, following information in relation to the recipient:-
(i) tax payable on estimated income of the previous year relevant to the assessment year;
(ii) tax payable on the assessed or returned or estimated income, as the case may be, of preceding four previous years;
(iii) existing liability under the Income-tax Act, 1961(43 of 1961) and Wealth-tax Act, 1957(27 of 1957);
(iv) advance tax payment, tax deducted at source and tax collected at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1).
(5) The certificate shall be valid only for the payment to non-resident named therein and for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.
(6) An application for a fresh certificate may be made, if the assessee so desires, after the expiry of the period of validity of the earlier certificate or within three months before the expiry thereof.
(7) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down procedures, formats and standards for ensuring secure capture and transmission of data and uploading of documents and the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the furnishing of Form No 15E and issuance of Certificate under sub-rule (3).”
3. In the principal rules, after form 15D, the following form shall be inserted, namely: —
“FORM No. 15E
[See rule 29BA]
Application by a person for a certificate under section 195(2) and 195(7) of the Income-tax Act, 1961, for determination of appropriate proportion of sum (other than salary) payable to non-resident, chargeable to tax in case of the recipient.
To,
The Assessing Officer,
……………………….
I ______________ being the person responsible for making payment to a non-resident or to a foreign company any sum (not being income chargeable under the head “Salaries”) do, hereby, request that a certificate may be issued to me after determining the appropriate proportion of such sum chargeable to tax in the case of the recipient (if any) and authorise me to deduct income-tax on such appropriate proportion (if any). The relevant particulars are as below:
…..
…..
[Notification No. 18/2021 F. No. 370142/24/2019-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation)
Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide number S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification number G.S.R. 175(E), dated the 12th March, 2021.
Download CBDT Notification No. 18/2021 dated 16.03.2021 on Furnishing Application in Form 15E under Rule 29BA in pdf format
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