This Tax Alert summarizes a recent Circular 11 of 2016 (Circular 11) issued by the Central Board of Direct Taxes (CBDT), the apex administrative body of direct taxes in India.
Circular 11 deals with the issue of payment of interest by the Indian Tax Authority to a resident tax deductor, on refund of excess tax deducted at source (TDS), in respect of payments made to a nonresident (NR). Based on a ruling of Supreme Court of India (SC) in case of Tata Chemicals Ltd., Circular 11 clarifies that (a) a resident tax deductor is entitled to refund of any excess TDS deposited with interest (b) Interest is calculated from the date of payment of such excess TDS. The Indian Tax Authority is directed not to press litigation on the above issue in new/existing cases.
Circular 11 is a welcome step and it will have a positive impact in cutting down litigation and hardships for taxpayers in India. Just like various other recent administrative circulars, it indicates the intention of the present Government of India to provide certainty in taxation and reduce litigation. Circular 11 directs the Indian Tax Authority to grant interest on refund of excess TDS deposited and not to press litigation on the issue. The administrative Circular will be binding on the Indian Tax Authority.
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