CBDT eases TDS claims rules for non-resident investors

Non-resident companies will now be able to claim benefits of tax treaty, only by providing personal details like name, address and tax residency certificate; they would not have to provide their permanent account numbers (PAN).

The Central Board of Direct Taxes (CBDT) has brought Rule 37BC, relaxing non-residents from furnishing PAN number in India in order to claim TDS benefits. These ‘non-resident’ entities include foreign partnership, foreign body corporate and foreign companies.

Earlier, non-residents who didn’t provide PAN details were subject to higher rate of withholding tax on payments that Indian companies made in form of interest, royalty, fees for technical services.

Now, non-residents will be able to claim the beneficial provisions of the tax treaty by providing some details like name, email-id, address, Tax Residency Certificate (TRC) and Tax Identification Number (TIN) or any similar Unique Identification number that they must have obtained from their country of residence.

As per Section 206AA of IT Act, in absence of PAN, the payer was liable to withhold taxes at the rate of 20% or the rate of tax as per the Act or that as per tax treaty (whichever is higher) while making payment to a non-resident. This made PAN mandatory for every non-resident, which was not an easy process. The new rule removes this need for PAN details.

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