Leisure to Non-residents From Larger Withholding Tax Fee in The Absence of PAN

The prevailing provisions of part 206AA of the Revenue Tax Act, 1961 (“the Act”), inter alia, present that any one who is entitled to obtain any quantity on which withholding tax (“WHT”) provisions apply shall furnish his Everlasting Account Quantity (“PAN”) to the deductor, failing which the next WHT price of 20% will probably be relevant. The above part was launched by Finance (No.2) Act, 2009 to enhance the compliance with the provisions of quoting PAN and with a view to path the taxability of the funds within the palms of recipients. These provisions have been made relevant not just for home recipients, but additionally for non-resident recipients, the place the funds have been topic to WHT provisions. Within the context of non-resident recipients, it might be related to refer the provisions of part 90(2) of the Act, which gives that the place the Indian Authorities has entered into an settlement with the federal government of another nation exterior India for granting reduction from tax or stopping avoidance of tax, the provisions of the Act would apply to the extent they’re extra helpful to the non-resident taxpayer. In different phrases, the provisions of the Tax Treaty would override the provisions of the Act if they’re extra helpful to the non-resident taxpayer. However, part 206AA of the Act additionally begins with a non-obstante clause that enables this part to override different provisions of the Act. Due to this fact, it has given rise to a dispute as as to whether the provisions of part 206AA of the Act would additionally override the advantages (if any) accessible below the Tax Treaties within the absence of PAN. The income authorities have been usually taking a place that the benefit of helpful WHT charges as per Tax Treaties (wherever relevant) wouldn’t be accessible to the non-resident recipients, in case of non-furnishing of PAN, and the upper WHT price of 20% would apply. Accordingly, the above provisions have been proving to be an obstacle by way of ease of doing enterprise in India, as many non-residents most well-liked to not do enterprise with Indian firms, if acquiring of PAN was insisted upon. Revenue-Tax Simplification Committee Report A committee below the chairmanship of Justice R. V. Easwar (Retd.) was constituted by the Indian Authorities in 2015 with the broad goal to check and establish the provisions of the Act which have given rise to litigation on account of interpretative variations and impacted the benefit of doing enterprise in India. The committee inter-alia offered its suggestions on the applicability of the provisions of part 206AA of the Act. The committee in its report advisable that “it should suffice if the concerned non-resident furnished to the deductor, in lieu of such Permanent Account Number, his tax identification number in the country or the specified territory of residence and in case there is no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which such person claims to be a resident.” The committee noticed that in view of the provisions below the respective tax treaties prescribing particular charges for WHT, there was no justification for offering WHT at the next price than as prescribed below the respective tax treaties. Accordingly, amending the provisions of part 206AA of the Act was advisable. Modification made to part 206AA by Finance Act, 2016 and up to date prescribed guidelines According to the suggestions proposed by the Committee, the provisions of the part 206AA of the Act have been amended (w.e.f. June 1, 2016) to supply leisure from greater WHT price whereas making cost to non-resident recipients within the absence of PAN, topic to the fulfilment of the prescribed situations. For this objective, the Central Board of Direct Taxes (“CBDT”) has not too long ago notified a brand new Rule 37BC below Revenue Tax Guidelines, 1962 (“the Rules”) vide Notification No. 53 /2016 (F.No.370 142/16/2016-TPL) dated June 24, 2016 to specify the situations to avail the aforesaid leisure.

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