S. 195 TDS Amendment: CBDT Invites Suggestions From Public

The CBDT has vide letter dated 31.12.2019 invited public consultation on the proposal for amendment of Income-tax Rules 1962, to insert new rule 29BA and Form 15E, to give effect to the amendment in section 195 of the Income-tax Act , 1961 (the Act) vide Finance (No.2) Act 2019

F. No. 370142/24/2019-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
*****
Date: December 31s , 2019
147B-II, North Block, Delhi
Office Memorandum
Subject: Public consultation on the proposal for amendment of Income-tax Rules 1962, to
insert new rule 29BA and Form 15E, to give effect to the amendment in section 195 of the
Income-tax Act , 1961 (the Act) vide Finance (No.2) Act 2019- reg.
Section 195 of the Act relates to levy of tax deduction at source (TDS) on any sum
chargea ble to tax and which is paid to a non-resident, not being a company, or to a foreign
company. Prior to the amendment, sub-section (2) of the said section provided that where the
person responsible for paying such sum chargeable under the Act to a non-resident considers that
the whole of such sum would not be income chargeable in the case of the recipient, he may make
an application to the Assessing Officer to determine, by general or special order, the appropriate
of such sum so chargeable and upon such determination, tax shall be deducted only on that
proport ion of the sum which is so chargeable.
2. However, no format was prescribed for making the application under sub-section (2) of
section 195. Therefo re, the deductor has to write an application on plain paper and physically
submit it to the Assess ing Officer. The AO then issues a certificate determining by general or
special order, the appropriate proportion of such sum so chargeable to tax at source under section
(I ) of section 195 of the Act, and there are also no standard operating procedures in respect of
processing and disposal of the application under the said sub-section. This increases uncertainty
and causes inconvenience to deductors.
3 Further, sub-section (7 ) of section 195 also provided that the Government may speci fy a
class of persons or cases, where the deductor who is responsible for paying to a non-resident. not
being a company, or to a foreign company, any sum, whether or not chargeable under the
provisions of this Act. shall make an application to the Assess ing Officer to determ ine. by
general or speci al order. the appropriate proportion of sum chargeabl e, and upon such
determination. tax shall be deducted under sub-sec tion (I ) on that proportion of the sum which is
so chargeable. However. no format was prescribed for making such applic ation and neither i
any standard operating procedures specified in respect of processing and disposal of the
application. There was a demand from various stakeholders to streamline the process of passing
of such orders under section 195(2) of the Act.
F. No. 370142/24/2019-TPL
4. In order to streamline the process for making an application by the deductor and to
reduce the human interface, section 195 of the Act was amended through Finance (No.2), Act
2019. The new amended section 195 now empowers the Board to prescribe the form and manner
of filing of application under sub-section (2) to determine the appropriate proportion of such sum
so chargeable and upon determination tax to be deducted as per sub-section (I) of section 195 on
that proportion only. Further sub-section (7) of section 195 was amended to provide that the
Government may specify a class of persons or cases, where the deductor who is responsible for
paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not
chargeable under the provisions of this Act, shall make an application to the Assess ing Officer in
such form and manner and Assessing officer to determine in such manner as may be prescribed
the appropriate proportion of sum chargeable, and upon such determination, tax shall be
deducted under sub-sect ion ( I) .
5. As a result of the amendments carried out in sub-section (2) and sub-section (7) of section
195 of the Act, vide Finance (No.2) Act, 2019, consequential amend ments have to be carried out
in Income-tax Rules, 1962 (the Rules) and Forms to give effect to the amendments.
6. In view of the above discussion, a new Form I5E is proposed to be introduced in the Rules
to operationalize the provisions of the section 195(2) of the Act.
7. It has been decided to seek the stakeholder’s comments in relation to proposed Form I5E
to be introduced in the Rules. In this regard. comments and suggestions arc invited from the
general public on the proposed form. The comments/suggestions may be sent electronically (in
word format) though email at ustpI3@nic .in within 15 days of publication of this document on
the Income Tax website (www.incometaxindia.gov.in).