Tax Deduction at Source under section 195 of Income Tax Act

Section 90(4) of the Act requires every non-resident desirous to claiming DTAA benefit to furnish a TRC (Tax Residence Certificate) issued by the Government of his country of residence.

Section 90(5) read with Rule 21AB of the Rules 21AB of the Rules, further requires the payee to furnish the following information in the prescribed form No.10F to the extent such information is not covered in the TRC:

  • Status of the assessee
  • Permanent Account Number (‘PAN’) of the assessee if allotted
  • Nationality or country or specified territory of incorporation or registration
  • Assessee’s tax identification number in the country of residence
  • Period for which the residential status as mentioned in the TRC is applicable
  • Address of the assessee in the country of residence

 

Aids to determine taxability of the Remittance and the applicable TDS

Documentary:

  • Agreement(s)/Contract(s) underlying the transaction
  • Invoice(s)/Debit Notes being paid
  • Other correspondence between the parties, for determining the exact nature of the payment
  • A visit to the non-resident’s website to see how they have described their India office operations.
  • Copy of payee’s TRC for the relevant period and form 10F (See sub-rule (1) of rule 21AB)
  • In case of TRC for the relevant period has yet to be received, a copy of the application filed by the payee for obtaining the same and details of the payee’s tax identification or other unique numbers in the country of tax residence.
  • Written confirmation from the payee that:
    • It was a tax resident of the country of residence during the relevant period and is eligible for the benefits of the applicable DTAA (this may be obtained where the payee has provided a copy of the past period’s TRC and the TRC of the relevant period has yet to be received)
    • It is the beneficiary of the sum being remitted
    • It does not have a PE in India within the meaning of the applicable DTAA

 

  • Order/certificate obtained, if any, under section 195(2), 195(3), 197 of the Act
  • SBI’s certificate providing the required TT buying rates

 

 

Legal:

  • Provision of the Act
  • Provisions of the applicable DTAA (including protocol, MFN and LOB clauses, if any)
  • Judicial precedents
  • Commentaries – OECD Model Tax Convention and UN Model
  • Commentaries – renowned authors

Surcharge and education cess should not be added to the rate specified under the DTAA

Article 2 of the most of the DTAAs provides that income-tax shall also include surcharges thereon, Thus the tax rate under the DTAA is all inclusive i.e. surcharge, educational cess are already included and are not to be separately added. A similar proposition has been upheld in the following decisions:

Some of the relevant provisions of Income Tax Act and Rules are listed below

2(37A)(iii)

iii)   for the purposes of deduction of tax under 28[section 194LBA or]28a[ section 194LBB or section 194LBC orsection 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in 29[an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government undersection 90A, whichever is applicable by virtue of the provisions of section 90, or section 90A, as the case may be];]

[Agreement with foreign countries or specified territories.

90. (1) The Central Government may enter into an agreement with the Government of any country outside India or specified territory outside India,—

(a)   for the granting of relief in respect of—  
(i)   income on which have been paid both income-tax under this Act and income-tax in that country or specified territory, as the case may be, or  
(ii)   income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be, to promote mutual economic relations, trade and investment, or  
(b)   for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be, or
(c)   for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corres-ponding law in force in that country or specified territory, as the case may be, or investigation of cases of such evasion or avoidance, or
(d)   for recovery of income-tax under this Act and under the corresponding law in force in that country or specified territory, as the case may be,

and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement.

(2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.

[(2A)Notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A of the Act shall apply to the assessee even if such provisions are not beneficial to him.]

(3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification21a issued by the Central Government in the Official Gazette in this behalf.

[(4) An assessee, not being a resident, to whom an agreement referred to in sub-section (1) applies, shall not be entitled to claim any relief under such agreement unless 23 [a certificate24 of his being a resident] in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory.]

[(5) The assessee referred to in sub-section (4) shall also provide such other documents and information, as may be prescribed26 .]

Explanation 1.—For the removal of doubts, it is hereby declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company.

Explanation 2.—For the purposes of this section, “specified territory” means any area outside India which may be notified27 as such by the Central Government.]

28 [Explanation 3.—For the removal of doubts, it is hereby declared that where any term is used in any agreement entered into under sub-section (1) and not defined under the said agreement or the Act, but is assigned a meaning to it in the notification issued under sub-section (3) and the notification issued thereunder being in force, then, the meaning assigned to such term shall be deemed to have effect from the date on which the said agreement came into force.]

 

 

  1.  in the Official Gazette, make such provisions as may be necessary for implementing the agreement.

(2) Where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.

(3) Any term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf.

Explanation.—For the removal of doubts, it is hereby declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company.

 

“(2A) Notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A of the Act shall apply to the assessee, even if such provisions are not beneficial to him.”

 

[Furnishing of information for payment to a non-resident, not being a company, or to a foreign company.

37BB . (1) The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum chargeable under the provisions of the Act, shall furnish the following, namely:—

(i)   the information in Part A of Form No.15CA, if the amount of payment or the aggregate of such payments, as the case may be, made during the financial year does not exceed five lakh rupees;
(ii)   for payments other than the payments referred in clause (i), the information,—
(a)   in Part B of Form No.15CA after obtaining,—  
(I)   a certificate from the Assessing Officer under section 197; or  
(II)   an order from the Assessing Officer under sub-section (2) or sub-section (3) of section 195;  
(b)   in Part C of Form No.15CA after obtaining a certificate in Form No. 15CB from an accountant as defined in the Explanation below sub-section (2) of section 288.  

(2) The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum which is not chargeable under the provisions of the Act, shall furnish the information in Part D of Form No.15CA.

(3) Notwithstanding anything contained in sub-rule (2), no information is required to be furnished for any sum which is not chargeable under the provisions of the Act, if,—

(i)   the remittance is made by an individual and it does not require prior approval of Reserve Bank of India as per the provisions of section 5 of the Foreign Exchange Management Act, 1999 (42 of 1999) read with Schedule III to the Foreign Exchange (Current Account Transaction) Rules, 2000; or
(ii)   the remittance is of the nature specified in column (3) of the specified list below:

SPECIFIED LIST

Sl. No. Purpose code as per RBI Nature of payment
(1) (2) (3)
1 S0001 Indian investment abroad – in equity capital (shares)
2 S0002 Indian investment abroad – in debt securities
3 S0003 Indian investment abroad – in branches and wholly owned subsidiaries
4 S0004 Indian investment abroad – in subsidiaries and associates
5 S0005 Indian investment abroad – in real estate
6 S0011 Loans extended to Non-Residents
7 S0101 Advance payment against imports
8 S0102 Payment towards imports – settlement of invoice
9 S0103 Imports by diplomatic missions
10 S0104 Intermediary trade
11 S0190 Imports below Rs.5,00,000 – (For use by ECD offices)
12 SO202 Payment for operating expenses of Indian shipping companies operating abroad
13 SO208 Operating expenses of Indian Airlines companies operating abroad
14 S0212 Booking of passages abroad – Airlines companies
15 S0301 Remittance towards business travel
16 S0302 Travel under basic travel quota (BTQ)
17 S0303 Travel for pilgrimage
18 S0304 Travel for medical treatment
19 S0305 Travel for education (including fees, hostel expenses etc.)
20 S0401 Postal services
21 S0501 Construction of projects abroad by Indian companies including import of goods at project site
22 S0602 Freight insurance – relating to import and export of goods
23 S1011 Payments for maintenance of offices abroad
24 S1201 Maintenance of Indian embassies abroad
25 S1202 Remittances by foreign embassies in India
26 S1301 Remittance by non-residents towards family maintenance and savings
27 S1302 Remittance towards personal gifts and donations
28 S1303 Remittance towards donations to religious and charitable institutions abroad
29 S1304 Remittance towards grants and donations to other Governments and charitable institutions established by the Governments
30 S1305 Contributions or donations by the Government to international institutions
31 S1306 Remittance towards payment or refund of taxes
32 S1501 Refunds or rebates or reduction in invoice value on account of exports
33 S1503 Payments by residents for international bidding.

(4) The information in Form No. 15CA shall be furnished,—

(i)   electronically under digital signature in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) under sub-rule (8) and a thereafter printout of the said form shall be submitted to the authorised dealer, prior to remitting the payment; or
(ii)   electronically in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) under sub-rule (8) and thereafter signed printout of the said form shall be submitted to the authorised dealer, prior to remitting the payment.

(5) An income-tax authority may require the authorised dealer to furnish the signed printout of Form No.15CA referred to in clause (ii) of sub-rule (4) for the purposes of any proceedings under the Act.

(6) The certificate in Form No. 15CB shall be furnished and verified electronically in accordance with the procedures, formats and standards specified by the Principal Director-General of Income-tax (Systems) under sub-rule (8).

(7) The authorised dealer shall furnish a quarterly statement for each quarter of the financial year in Form No.15CC to the Principal Director General of Income-tax (Systems) or the person authorised by the Principal Director General of Income-tax (Systems) electronically under digital signature within fifteen days from the end of the quarter of the financial year to which such statement relates in accordance with the procedures, formats and standards specified by the Principal Director General of Income-tax (Systems) under sub-rule (8).

(8) The Principal Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of Form 15CA, Form 15CB and Form 15CC and shall be responsible for the day-to-day administration in relation to the furnishing and verification of information, certificate and quarterly statement in accordance with the provisions of sub-rules (4), (6) and (7).

Explanation.— For the purposes of this rule ‘authorised dealer’ means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999).]

 


1 [Relaxation from deduction of tax at a higher rate under section 206AA.

37BC. (1) In the case of a non-resident, not being a company, or a foreign company (hereafter referred to as ‘deductee’) and not having permanent account number the provisions of section 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset, if the deductee furnishes the details and the documents specified in sub-rule (2) to the deductor.

(2) The deductee referred to in sub-rule (1), shall in respect of payments specified therein, furnish the following details and documents to the deductor, namely:—

(i)   name, e-mail id, contact number;
(ii)   address in the country or specified territory outside India of which the deductee is a resident;
(iii)   a certificate of his being resident in any country or specified territory outside India from the Government of that country or specified territory if the law of that country or specified territory provides for issuance of such certificate;
(iv)   Tax Identification Number of the deductee in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the deductee is identified by the Government of that country or the specified territory of which he claims to be a resident.]
  1. Rule 37BC inserted by the Income-tax (Seventeenth Amendment) Rules, 2016, w.e.f. 24-6-2016.

 

34 [ Certificate for claiming relief under an agreement referred to in sections 90 and 90A .

21AB . 34a [ (1) Subject to the provisions of sub-rule (2), for the purposes of sub-section (5) of section 90 and sub-section (5) of section 90A, the following information shall be provided by an assessee in Form No. 10F, namely:—

(i)   Status (individual, company, firm etc.) of the assessee;
(ii)   Nationality (in case of an individual) or country or specified territory of incorporation or registration (in case of others);
(iii)   Assessee’s tax identification number in the country or 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 the asseessee claims to be a resident;
(iv)   Period for which the residential status, as mentioned in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A, is applicable; and
(v)   Address of the assessee in the country or specified territory outside India, during the period for which the certificate, as mentioned in (iv) above, is applicable.

(2) The assessee may not be required to provide the information or any part thereof referred to in sub-rule (1) if the information or the part thereof, as the case may be, is contained in the certificate referred to in sub-section (4) of section 90 or sub-section (4) of section 90A.

(2A) The assessee shall keep and maintain such documents as are necessary to substantiate the information provided under sub-rule (1) and an income-tax authority may require the assessee to provide the said documents in relation to a claim by the said assessee of any relief under an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A, as the case may be. ]

(3) An assessee, being a resident in India, shall, for obtaining a certificate of residence for the purposes of an agreement referred to in section 90 and section 90A, make an application in Form No. 10FA to the Assessing Officer.

(4) The Assessing Officer on receipt of an application referred to in sub-rule (3) and being satisfied in this behalf, shall issue a certificate of residence in respect of the assessee in Form No. 10FB. ]

 

 

 

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NETWORKDAYS.INTL Weekend working days

Returns the number of net working days between two provided days excluding specified weekend days and holidays.Google has introduced the Networkdays.intl function in December’ 2013

Let’s look at the syntax of the function

NETWORKDAYS.INTL(start_date, end_date, [weekend], [holidays])

Always remember when anything is square brackets [ ] that argument is optional, when ever you are using the fourth argument you have to use weekend argument otherwise you may get #Value error

the list of weekend are as follows:

Let’s try to understand the with an example.

Suppose we have dates in the cell B1 to B10 and we have holidays from Cell D2:D3 to find out the list working days between the given date we use the networkdays.intl function.

the formula in i used in the cell D5 is

=NETWORKDAYS.INTL(B1,B10,1,D2:D3)

in this example i have assumed that Saturday & Sundays are holidays

the same thing can be written using binary

=NETWORKDAYS.INTL(B1,B10,”0000011″,D2:D3)

we will get the same results as 4

the advantage of writing with the binary form is suppose working days are only Friday, Saturday, Sunday and Monday something like a weekend market, we do not have such option in the weekend argument, so we have use the binary format. The formula will be

=NETWORKDAYS.INTL(B1,B10,”1000111″,D2:D3)

the result you will get is 7

Query function with manipulation of dates

This post is in continuation of my earlier post on query function. for basic understand the query function have a look at the following link https://anandexcels.wordpress.com/2013/11/01/query-function-in-google-sheets/

https://anandexcels.wordpress.com/2013/11/07/single-column-manipulation-using-query-function/

https://anandexcels.wordpress.com/2013/11/08/query-function-refering-to-cell-value/

Now we will see how to manipulate Query function with DATES, manipulation of date is query function is tricky. some query does not understand the date because in the spreadsheets dates are treated as serial numbers and query understanding it as text. We have to trick the query function

(Q) Suppose we want list the data based on the certain dates referring to cell

we will continue to use the old example in my first query post

solution is as follows:

=QUERY(A:D;”select * where D>=date”””&text(F1,”yyyy-mm-dd”)&””” and D<=date”””&text(G1,”yyyy-mm-dd”)&””””)

 

where F1 is the start date and G1 is the end date

Observations

(1) There are three double quote before text function and after text function

(2) we have used the text function to convert the numbers into text

(3) date has to be formatted in yyyy-mm-dd format only.

the link to spreadsheet is available in my first blogpost listed above

 

Query function refering to cell value

This post is in continuation of my earlier post on query function. for basic understand the query function have a look at the following link https://anandexcels.wordpress.com/2013/11/01/query-function-in-google-sheets/

Now we look at the referring to cell value within query function so that query function will be more robust.

(Q) What is sales value during the period for Britney

we will continue use our old data set

(A) The formula we are using is

=QUERY(A:D;”select B, Sum(C) where B ='”&F1&”‘ group by B label Sum(C) ‘Sales'”;1)

the results will be

where cell F1 contains the criteria in our example Britney

now we do not need to change the formula, if you change the cell value of F1 to from Britney to Paris the query function recalculates the values

the results will be

 

Observations:

(1) Remember query function is case sensitive

(2) if you use paris instead of Paris you may get the null string without any error

(3) observe the syntax after where B =

(4) if Cell F1 is string you have use single-quote double-quote ampersand then F1 similarly after F1 also, this is a syntax you have to follow

Single column manipulation using query function

This post is in continuation of my earlier post on query function. for basic understand the query function have a look at the following link https://anandexcels.wordpress.com/2013/11/01/query-function-in-google-sheets/

we will continue to use my earlier example only.

suppose if we want to count the First name and list them.

we can do this if we have multiple columns of data, suppose we have only one column we want to count as well as list them. you cannot do that using query function alone. we have to manipulate data using the Index function.

the formula for this is

=index(if({1,1},B2:B27))

this will create an array 2 X  26 on fly

Now we have two column of data we can use the query function to manipulate this

=query(index(if({1,1},B2:B27));”select Col1,count(Col2) where Col1 <>” group by Col1 label count(Col2) ‘Count’ “)

the result will be

 

Observations:

(1) We have not used the A, B instead we have used Col1 and Col2

(2) because the data is generated using the index function on fly

(3) we can create the copy of existing data using array constants

(4) the logic is within {1,1}

(5) you must use comma (in our example the data is single column), you should not use semi-colon

(6) comma is used for column manipulation and semi-colon is used for row manipulation

(7) this undocumented rules of array

 

Query function in Google Spreadsheets

Most versatile effective function and unique to Google Spreadsheets. I am documenting this function to understand it properly and for those who do not have programming background. I do not have previous experience with query. i will try to illustrate with examples.

If you have confusion and stuck some where please post your questions Google Docs forum at the following link https://productforums.google.com/forum/#!categories/docs/spreadsheets. There are experts in this area waiting for your questions.

Google Spreadsheet query is designed to be similar to SQL  with few exceptions. it is a subset of  SQL with a few feature of its own. if you are familiar with SQL it will be easy to learn.

The Syntax of the function is as follow:

QUERY(data, query, headers)

DATA: it can be columns(A:C open ranges) of data you want to query, range of cells such as A1:C10, result of function such as importrange, index etc.,

QUERY: It is similar to SQL with small exceptions there is no FROM clause in the this since DATA itself is acting like a FROM clause.

HEADERS: If your data has headers in the row you can specify this here (suppose your first row has headers you can specify this as 1)

Notes:

  1. column headers have to capital letter such A, B, C if you are picking up the raw data with in the same spreadsheet.

  2. if you are using the array formulas to manipulate the data (Index, Filter, importrange to name a few) then column headers will Col1, Col2, Col3 etc. observe i have used C capital letter in Col1. this is syntax you have to follow this otherwise you will get a parse error

  3. parse error:  an error of language resulting from code that does not conform to the syntax of the programming language; “syntax errors can be recognized at compilation time”

  4. Data types: supports data types are string, number, boolean, date, datetime and timeof day. all values of the column will have a data type that matches the column type or a null value

  5. The syntax of the query language is composed of the following clauses. Each clause starts with one or two keywords. All clauses are optional. Clauses are separated by spaces. The order of the clauses must be as follows:

    Clause

    Useage

    select

    Select which columns to return, and in what order, if omitted, all the table’s columns are returned, in their default order

    where

    Return only rows that match a condition. if omitted, all rows are returned.

    group by

    Aggregates values across rows

    pivot

    Transforms distinct values in columns into new column

    order by

    sorts rows by values in columns

    limit

    Limits the number of returned rows

    offset

    skips a given number of first rows

    label

    sets column labels

    format

    formats the values in certain columns using given formatting patterns

    options

    sets additional options

    now let try to understand these clauses with an example

  6. our data set like this

    s

  7. try this formula

    =QUERY(A:D;”select A,B”;1) the result will be as show in the below image

  8. We have some special keywords called functions, Functions are bits of code that perform an operation on a value or values. The first we will see is to perform a mathematical operation on a column. We will see Sum function which by totaling the values in a column designated by parentheses.

    suppose we want to Sum Column C where the Column B is Nicole

    =QUERY(A:D;”select B, Sum(C) where B = ‘Nicole’ group by B”;1)

  9. the result will be

  10.  

    Note:

    (1) you have to use S capital in the Sum followed by column you want sum in parentheses

    (2) whenever you are using the group by clause same column has to be selected in the select clause otherwise you may get value error

    (3) condition you want the check in the column B has to be in single quote

    this can be sorted using the order by clause

    =QUERY(A:D;”select B, Sum(C) where B <>” group by B order by B asc”;1)

    the result will be

    Note:

    (1) observe the column 1 has been sorted in ascending order

    (2) to get the the descending order you can use the desc instead of asc

  11. you can also sort the based on the result of the Sum(C)

    =QUERY(A:D;”select B, Sum(C) where B <>” group by B order by Sum(C) desc”;1)

    the results will be

    Note:

    (1) we have sorted data by descending order based on Sum of sales

    (2) you have to follow the order of clause listed above

    We can also limit the results top 3 or top 2 using the limit clause

    =QUERY(A:D;”select B, Sum(C) where B <>” group by B order by Sum(C) desc limit 3″;1)

    We can also the name the column sum Sales as Top 3 sales

    =QUERY(A:D;”select B, Sum(C) where B <>” group by B order by Sum(C) desc limit 3 label Sum(C) ‘Top 3 Sales'”;1)

    We can also pivot the data based on date in the D column.

    =QUERY(A:D;”select B, Sum(C) where B <>” group by B pivot D”;1)

    Note:

    (1) You might have observed the column D is not selected the select clause

    (2) Date are formatted in yyyy-mm-dd format

    (3) pivot is unique to google Sheets Query function

  12. In the next blog post we will see how to manipulate data using the cell value

  13. the link the spreadsheet is as follows:
  14. https://docs.google.com/spreadsheets/d/12B3C3NPLcZ1Dpa0jNvF2ClPWvLJBznCdHif6–m334c/edit?usp=sharing

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