Application for Lower/No Withholding of Tax: Sec 195 (2) & (3)

Objectives & Agenda :

To understand the process involved in making an Application to Assessing Officer for Lower withholding in case of payments to non-residents by the Payer [Sec 195(2)] or the request by the recipient for No withholding [Sec 195(3)]. We shall also look at procedural aspects involved and relevant caveats to be kept in mind.

1. Application for Lower/No Withholding of Tax: Sec 195 (2) & (3) CA Jugal Gala

2. Credits and Acknowledgments V Thirumal

3. Legends used in the Presentation TDS Tax Deducted at Source AO Assessing Officer DTAA Double Taxation Avoidance Agreements CBDT Central Board of Direct Taxes

4. Presentation Schema

5. Sec 195(1) – TDS on Other Sums Payable to Non-residents Any person responsible for Paying Interest Any other sum chargeable to tax a non-resident Other than interest referred to in Sec 194LB [Int. from Infrastructure debt fund], Sec 194LC [Int. on monies borrowed in foreign currency], Sec 194LD [Int. from Bonds and Govt. securities] Other than salary or to At the time of credit or payment Shall deduct tax at the rates in force whichever is earlier Deduction shall be made even by a non-resident payer if for the non-resident recipient, the sum is chargeable to tax as per Income-tax Act, 1961 (“the Act”)

6. Sec 195(2) – Application to AO by Payer And after such determination, tax shall be deducted only on that proportion To determine the appropriate proportion of such sum chargeable He may make an application to the AO Considers that the whole of such amount would not be chargeable in case of the recipient Any sum chargeable under the Act (other than salary) Where a person responsible for paying to a non-resident

7. Application under Sec 195(2)

8. Amendment by Union Budget 2019

9. Sec 195(3) – Application to AO by Recipient Where such certificate is granted and is in force, the payer shall not deduct TDS under Sec 195 for the grant of a certificate authorising him to receive such interest or other sum without TDS may make an application in the prescribed form [Form 15C or 15D] to the AO any interest or other sum on which income-tax has to be deducted under Sec 195 Any person entitled to receive

10. Rule 29B – Application under Sec 195(3) Application can be made by Banking company which is neither an Indian company nor a company which provides dividends within India, and which carries on operations in India through a branch For any income by way of interest, not being interest on securities, or any other sum, not being dividends Any other person who carries on a business or profession in India through a branch For any sum, not being interest or dividends In Form No. 15C In Form No. 15D in so far as it is receivable by such branch on its own account and not on behalf of its head office or any branch situated outside India, or any other person

11. Conditions and Validity The certificate shall be valid for the FY specified therein, unless it is cancelled by the AO at any time before the expiry of FY Application for fresh certificate may be made after the expiry of the period of validity, or within 3 months before the expiry On satisfaction of the conditions, the AO shall grant the certificate where it will not be prejudicial to the interest of the revenue

12. Contents of Form 15C Application by a banking company for a certificate under Sec 195(3) To The Assessing Officer, Sir, I, _________________ being the principal officer of [name of the banking company] hereby declare : (a) That ____________________ is a banking company which is neither an Indian company nor a company which has made the prescribe d arrangements for the declaration and payment of dividends within India and which is operating in India through a branch(es) at ___________________; (b) that the head office of the said company is situated at [name of the place and country]; (c) that the said company is entitled to receive interest (other than ‘Interest on securities’) and other sums not being dividends, chargeable under the provisions of the Income -tax Act, 1961, during the financial year ____ (d) that the company fulfils all the conditions laid down in Rule 29B of the Income-tax Rules, 1962.

13. Contd. I, therefore, request that a certificate may be issued authorising the said company to receive interest other than interest on securities (other than interest payable on securities referred {to in proviso to section 193) and other sums not being dividends, without deduction of tax under sub-section (1) of section 195 of the Income-tax Act, 1961, during the financial year___________ . I hereby declare that what is stated in this application is correct. Date _________________. Signature Address

14. Contents of Form 15D Application by a person other than a banking company for a certificate under Sec 195(3) To The Assessing Officer, Sir, I, ______________________ , being the principal officer of we [name of the person, firm or company entitled to receive sums other than interest and dividends] do hereby declare : that I/________________ [name of the firm, company, etc.] am/is a non-resident assessee (not being a banking company) carrying on business/profession in India through a branch(es) by name(s) having office(s) at ____________ ; that my head office/the head office of [name of the firm, company, etc.] is situated at [name of the place and country] that I/________________ [name of the firm, company, etc.] am/is entitled to receive income (other than dividends and interest) chargeable under the provisions of the Income-tax Act, 1961, during the financial year _____________; that I/________________ [name of the firm, company, etc.] fulfil(s) all the conditions laid down in rule 29B of the Income-tax Rules, 1962.

15. Contd. I, therefore, request that a certificate may be issued authorising me/_____________ [name of the firm, company, etc.] to receive income other than interest or dividends without deduction of tax under sub-section (1) of section 195 of the Income-tax Act, 1961, during the financial year ____________ . I hereby declare that what is stated in this application is correct. Date ___________. Signature Address

16. Documents Required In practice, following documents and clarifications may be requested by the AO to substantiate the application

17. Practical Issues

18. Relevant Considerations

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