The subject of the notification published by the Ministry of Finance on 31st December 2019 is the public consultation on the proposal for amendment of Income-tax Rules 1962, in order to introduce new rule 29BA as well as Form 15E, towards giving effect to the amendment in section 195 of the Income-tax Act, 1961 (the Act) through Finance (No.2) Act 2019- reg.
As per Section 195 of the Act, it relates to levying of tax deduction at source (TDS) on any amount chargeable to tax and which is paid towards a non-resident, not being a corporation, or to a foreign corporation. Before the amendment was made, sub-section (2) of the stated section furnished that where the individual liable for paying such amount chargeable under the Act towards a non-resident considers that the entire amount would not be an income chargeable in the case of the recipient, he could make an application to the Assessing Officer to decide, by means of general or special order, the appropriate of such amount so chargeable and upon such determination, tax would be deducted only on that proportion of the amount which is so changeable.
2. Though, no format has been set for making the application under sub-section (2) of section 195. Thus, the deductor had to write an application on plain paper and is required to submit it physically to the Assessing Officer. The Assessing Officer then issues a certificate determining by means of general or special order, the appropriate proportion of such amount so chargeable to tax at source under section (1) of section 195 of the Act, and there are also no standard operating processes with respect to processing as well as disposal of the application under the stated sub-section. This increases uncertainty and causes inconvenience towards deductors.
3 Furthermore, subsection (7) of section 195 also furnished that the Government might state a class of persons or cases, where the deductor who is liable for paying towards a non-resident. not being a corporation, or to a foreign corporation, any amount, whether or not chargeable under the provisions of this Act, would make an application to the Assessing Officer to decide, by means of general or special order, the correct proportion of amount chargeable, and depending on such determination, tax would be deducted under sub-section (1) on that proportion of the amount which is so changeable. Though no format has been set for making such application and neither is any standard operating processes stated with respect to processing and disposal of the application. There was a demand from many stakeholders to streamline the procedure of passing such orders under section 195(2) of the Act.
4. Towards streamlining the procedure for making an application through the deductor and to lessen the human interface, section 195 of the Act has been amended through Finance (No.2), Act 2019. The latest amended section 195 presently allows the Board towards prescribing the form as well as the manner of filing of application under sub-section (2) in order to determine the correct proportion of such amount so chargeable as well as upon determination tax to be deducted according to sub-section (1) of section 195 on that proportion only.
Furthermore, as per sub-section (7) of section 195 which has been amended to furnish that the Government might state a class of individuals or cases, where the deductor who is liable for paying to a non-resident, not being a corporation, or to a foreign corporation, any amount, whether or not chargeable under the provisions of this Act, would make an application to the Assessing Officer in such form as well as manner and Assessing officer towards determining in such manner as might set the appropriate proportion of amount chargeable, and depending on such determination, tax would be deducted under sub-section (1).
5. As a result of the amendments which has been executed in sub-section (2) and sub-section (7) of section 195 of the Act, through Finance (No.2) Act, 2019, consequential amendments have been carried out in Income-tax Rules, 1962 (the Rules) and Forms to give effect towards the amendments.
6. Considering the above discussion, a new Form 15E has been suggested to be introduced in the Rules to operationalize the provisions of section 195(2) of the Act.
7. It was decided to seek the stakeholder’s comments regarding the proposed Form 15E that shall be introduced in the Rules. In this regard, comments, as well as suggestions, are invited from the general public on the proposed form. The comments or suggestions could be sent electronically (in word format) by emailing at ustpl3@nic.in in 15 days of publication of this specified document on the Income Tax website (www.incometaxindia.gov.in).
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