Section 195 Income-tax Act 1961
( AS AMENDED BY FINANCE ACT, 2017 )
( Section 195 Income-tax Act 1961 explains Other sums.)
Other sums.
23 195. 25[(1) 26Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest 27[(not being interest referred to in section 194LB or section 194LC)] 28[or section 194LD] 29[***] or any other sum chargeable under the provisions of this Act not being income chargeable under the head “Salaries” 31[***] 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 :
32[Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode :]
33[Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O.]
34[Explanation 1].—For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.]
35[Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has—
| (i) | a residence or place of business or business connection in India; or | |
| (ii) | any other presence in any manner whatsoever in India.] |
(2) Where the person responsible for paying any such sum chargeable under this Act (other than 36[***] 37[***] 38[***] 39[***] salary) 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 40[Assessing] Officer to determine, 41[by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable.
42[***]
43[(3) Subject to rules44 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 45[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).
(4) 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 46[Assessing] Officer before the expiry of such period, till such cancellation.
(5) 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.]
47[(6) The person 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 furnish the information relating to payment of such sum, in such form and manner, as may be prescribed.48]
49[(7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person 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 Assessing Officer to determine, by general or special order, the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of the sum which is so chargeable.]
Notes:
47. Substituted by the Finance Act, 2015, w.e.f. 1-6-2015. Prior to its substitution, sub-section (6), as inserted by the Finance Act, 2008, w.e.f. 1-4-2008, read as under :
“(6) The person referred to in sub-section (1) shall furnish the information relating to payment of any sum in such form and manner as may be prescribed by the Board.”
38. Word “, dividend” omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
37. Words “interest on securities” omitted by the Finance Act, 2003, w.e.f. 1-6-2003.
36. Words “interest including” omitted by the Finance Act, 1976, w.e.f. 1-6-1976.
35. Inserted by the Finance Act, 2012, w.r.e.f. 1-4-1962.
34. Explanation renumbered as Explanation 1 by the Finance Act, 2012, w.r.e.f. 1-4-1962.
33. Inserted by the Finance Act, 2003, w.e.f. 1-4-2003. Earlier, the second proviso was inserted by the Finance Act, 1997, w.e.f. 1-6-1997 and later on omitted by the Finance Act, 2002, w.e.f. 1-6-2002.
32. Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.r.e.f. 1-6-1987.
31. Words “or dividends” omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.
29. Words “(not being interest on securities)” omitted by the Finance Act, 2003, w.e.f. 1-6-2003.
28. Inserted by the Finance Act, 2013, w.e.f. 1-6-2013.
27. Inserted by the Finance Act, 2012, w.e.f. 1-4-2012.
26. See rules 26, 28, 28AA, 28AB, 29B, 30, 31, 31A, 31AB, 37BA and 37BB and Form Nos. 13, 15C, 15CA, 15CB, 15CC, 15D, 16A, 24G, 26AS, 26B, 27A and 27Q.
25. Substituted by the Finance Act, 1987, w.e.f. 1-6-1987. Prior to substitution, sub-section (1) was amended by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1975, w.e.f. 1-4-1975.
23. See also Circular No. 370, dated 3-10-1983/Letter [F. No. 391/3/78-FTD], dated 9-7-1984 (Deduction on gross amount and not amount not of taxes)/Circular No. 152, dated 27-11-1974 [Application to ITO u/s 195(2)], Letter [F. No. 12/29/65-IT(B)], dated 1-6-1965/Circular No. 43, dated 20-6-1970 (Interest on moneys in NR account), Circular No. 20(II-4), dated 3-8-1961 (Payments to foreign banks having branch in India), Circular No. 588, dated 2-1-1991 (Payments to foreign supplier towards systems software alongwith hardware), Circular No. 695, dated 28-11-1994 (Form of application), Circular No. 723, dated 19-9-1995 (Payments to agents of non-resident ship owners), Circular No. 728, dated 30-10-1995 (Remittances to country with which DTAA is in force), Circular No. 734, dated 24-1-1996 (Payments to NRIs in UAE), Circular No. 740, dated 17-4-1996 (Payments to branches in India of foreign company/concern), Circular Nos. 769, dated 6-8-1998/7/2007, dated 23-10-2007 and 7/2011, dated 27-9-2011 (Procedure for refund of tax deducted at source u/s 195), Circular No. 789, dated 13-4-2000 and Circular No. 1/2003, dated 10-2-2003 (Taxation of income from dividends and capital gains under the Indo-Mauritius DTAC), Instruction No. 2/2014, dated 26-2-2014 [Sum chargeable to tax, determination of], TDS Instruction No. 51 [F.No. SW/TDS/02/2013/DIT(S)-II], dated 4-2-2016 (Procedure for submission of Form 15CC by an authorised dealer in respect of remittances under section 195(6) read with rule 37BB) and Circular No. 11/2016, dated 26-4-2016 (Payment of interest on refund u/s 244A of excess TDS deposited u/s 195).