Certificate for Lower or Nil Deduction of TDS to Non-Resident under Section 195 of the Income-tax Act 1961

Certificate for Lower or Nil Deduction of TDS to Non-Resident under Section 195 of the Income-tax Act 1961

Certificate for lower or nil deduction of tax is issued by the jurisdiction assessing officer (International Department) to the non-resident for a specified period mentioned in the certificate for which it is valid unless it is cancelled by the assessing officer.

Section 195 (5) of the Income-tax Act, specified that the Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.

 Sub-section (3) of section 195 of the IT act, specified that, Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1).

Sub-section (4) of section 195 of the IT act, specified that, A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation.

Sub-section (1) of section 195 of the IT act, Any person responsible for paying to a non-resident, any interest or section 194LD or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries") shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.

Accordingly, the Board has prescribed Form no. 13 for making an online application for lower deduction of tax read with rule 28B of the Income-tax Rules 1962.

Required Documents for Certificate of Lower or Nil Deduction of TDS to Non-Resident under Section 195 of the Income-tax Act 1961 in case of sale of property other than agriculture land.

1.    Online application in Form 13.

2.    PAN Number of the Assessee.

3.    Proof of NRI. (Non Resident of India)

4.    Power of Attorney on INR 500 /- Stamp Paper. (In case where, assesse presented by the authorized representative)

5.    Copy of Index - II along with Purchases Deed.

6.    Copy of Draft Sales Deed.

7.    Copy / Detail of Buyer/Buyers TAN Issued by NSDL.

8.    Computation of Long Term Capital Gain.

9.    Copy of Return of Income along with Computation for Last 3 Years, (If NO ITR, Affidavit on INR 500 /- stamp paper for the same) in respect of the all sellers.

10.  Copy of Stamp Duty Valuation.

11.  Registered Government Document for Investment U/S 54/54EC.

12.  The Amounts Received out of the Total Consideration till date.

Once application received before assessing officer for lower or nil deduction of TDS by a non-resident, assessing office in return issue the certificate as per provision of the act after duly satisfied the all documents submitted before his/her officer.

Guidelines for handling issues related to applications received u/s 195: In order to streamline the procedure of handling the applications received u/s 195 and guidelines make it mandatory for the Assessing Officer to dispose of the applications u/s 195 within a time frame of 30 days from the end of the month in which application complete in ALL RESPECT is received. Section 195 strikes a delicate balance between requirement of ensuring cash flow to the taxpayer and realizing government dues at the earliest.