The document discusses requirements for deducting tax at source on cross border payments to non-residents. It covers topics like chargeability to tax under section 195, scope of income as per sections 5(2) and 9(1), rate of withholding tax determined by section 90(2) and tax residency certificates under section 90(4). It also explains the new requirements introduced by notification 93/2015 for furnishing information in Form 15CA and obtaining an accountant certificate in Form 15CB for certain payments to non-residents.

1. Cross Border
Payments
Presented by:
Dinesh R. Shah & Co. 23rd April, 2016

2. Introduction
Payments
“FROM” Person
Outside India
Payments “TO”
Person Outside India
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3. TOPICS COVERED
 Section 195: Chargeability to Tax
 Section 5(2) and 9(1): Scope of Income
 Section 90(2): Rate of Withholding Tax
 Section 90(4): Tax Residency Certificate
 New Requirements of 15CA & 15CB

4. “ AM I SUPPOSED TO DEDUCT TAX
AT SOURCE?
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5. 1.
Chargebility to Tax
Section 195 of the Income Tax Act.
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6. Section 195(1)
▪ Payer: Any person responsible for paying to a;
▪ Payee: A Non resident, not being a company, or to a foreign company ;
▪ Amount payable: Any Interest or other sum chargeable under the
provisions of the Act;
▪ Time of deduction: Shall at the time of credit or payment whichever is
earlier;
▪ Rate of deduction: Shall deduct the tax at rates in force.
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7. Difference between section 195 and other TDS
provisions
Area Section 195 Other TDS Provisions
Nature of payment
Any income chargeable under
Income Tax Act
Specific Payments, whether
income or not
Sum chargeable to tax Any sum Above threshhold
Applicability Any person Specified person
Certificate of
Remittance
Mandatory Not required
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8. Approaching to Taxability
step 1 step 2 step 3
Classify the
transaction
under
appropriate
head of
section 9(1)
Check the
taxability
under Income
Tax Act
If step 2 is in
affirmative,
check
taxability
under DTAA
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9. 2.
Scope and Nature of Income
Section 5(2) and section 9 of the Income Tax Act.
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10. Section 5(2)
Provides that, income of a
Non-Resident is taxable in
India if it is received or
deemed to be received in India
or accrues or arises or is
deemed to accrue or arise in
India.
Section 9
It covers income deemed to
accrue and arise in India
The scope of income, of an NR in India, chargeable
to tax shall be determined on the basis of:
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11. Further Bifurcating Section 9 Alongside Treaty Articles
Source Of Income Section under IT Act Treaty Article
Business Income
9(1)(i): Concept of business
connection
5; 7; 14: Concept of Permanent
Establishment/PE or Fixed Base
Capital Gain 9(1)(i) 13
Salaries 9(1)(ii) & 9(1)(iii) 15
Dividend 9(1)(iv) 10
Interest 9(1)(v) 11
Royalty 9(1)(vi) 12
FTS 9(1)(vii) 12

12. 3.
Rate of Withholding Tax
Section 90(2), 90(4) and 91 of the Income Tax Act.
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13. Section 90(2)
▪ Where the Central Government has entered into an agreement with
the Government of any country outside India
▪ 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.
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14. Rate of TDS
1. Rates prescribed under the Act has to be increased by Surcharge and
Education Cess at the prescribed rates;
Or
2. If the payment is as per DTAA rates, No requirement to increase by
Surcharge or Education Cess.
Whichever is beneficial to the assessee
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15. Section 90(4)
▪ An assessee, not being a resident,
▪ shall not be entitled to claim any relief under such agreement
▪ unless a certificate 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.
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16. Format of Details Required in TRC as prescribed by
CBDT (Rule 21AB)
Sr. No. Particulars
(i) Name of the assessee
(ii) Status (individual, company, firm, etc.) of the assessee
(iii) Nationality (incase of individual)
(iv) Country or specified territory of incorporation or registration (incase of others)
(v)
Assessee’s tax identification number in the country of residence, if no such number is
aailbale, then a unique identification number as issued by that Government
(vi) Residential status for the purpose of tax
(vii) Period for which certificate is applicable
(viii) Address of the applicant for the period of which the certificate is applicable

17. Section 91
▪ Relief from double taxation if India has no tax treaties
▪ Person resident in India is allowed credit of foreign taxes paid against
amount of Indian taxes payable.
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18. 4.
New Requirements of Form
15CA & 15CB
Notification No. 93/2015 dated 16th December, 2015.
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19. Sub-rule (2): In the Income-tax Rules, 1962 (hereafter referred to as
the said rules), for rule 37BB, the following rule shall be substituted,
namely:- “37BB. Furnishing of information for payment to a non-
resident, not being a company, or to a foreign company.-
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;

20. 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.
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21. 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 the list.
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22. OBJECTIVE
Reduce the burden of compliance
and collection of information
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23. Selection
of
Appropriate
Part
of 15CA

24. 1. Payment to NR covered
under Specified List? No information to be submitted
2. Is payment chargeable to
tax under the Act?
15CA- Part D
3. Aggregate of payment
during FY ≥ Rs. 5lacs
15CA- Part A
4. Order or Certificate obtained from
AO u/s 195(2), 195(3) or 197
15CA- Part C
15CA- Part B
With CA Certificate in
Form 15CB
Yes
No
No
No
Yes
Yes
Yes
No

25. FEW ILLUSTRATIONS
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26. Sr.
No.
Nature of
Payment
1. Under
Specified
List?
2.
Taxable
under IT
Act?
3.
Aggregate
in FY ≥ Rs.
5lacs?
4. Order/
Certificat
e from
AO?
Result
1 Import Payment Y - - -
15CA/CB not
required
2
Exhibition
expenses,
Membership
Fees, etc
N N - -
15CA Part D
[9(1)(i): Business
Income. No PE in
India, therefore,
not taxable]
3
Reimbursement
of Expenses
with back to
back invoices
N N - -
15CA Part D
[9(1)(i): Business
Income. No PE in
India, therefore,
not taxable]
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27. Sr.
No.
Nature of
Payment
1. Under
Specified
List?
2.
Taxable
under IT
Act?
3.
Aggregate
in FY ≥ Rs.
5lacs?
4. Order/
Certificat
e from
AO?
Result
4
Commission on
export sales
N N - -
15CA Part D
[9(1)(vii)(b):
services rendered
outside India and
not received by
him or on his
behalf in India.]
5 FTS/ Royalty N Y N - 15CA Part A
6 FTS/ Royalty N Y Y Y 15CA Part B
7 FTS/ Royalty N Y Y N
15CA Part C and
15CB
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28. Sr.
No.
Nature of
Payment
1. Under
Specified
List?
2.
Taxable
under IT
Act?
3.
Aggregate
in FY ≥ Rs.
5lacs?
4. Order/
Certificat
e from
AO?
Result
8 Dividend N N - -
15CA Part D
[10(34): dividend
income is
exempted in the
hands of
recipient]
9
Refund or
rebate or
reduction in
invoice value
incase of
Exports
Y - - -
15CA/CB not
required
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29. Thanks!
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30. Disclaimer
The views expressed are for general information and providing guidance
on the subject concerned. The information is not a legal advice. All images
of trademarked, copyrighted and/or patented material in this
presentation are for informational and educational purpose only.
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