Other payments to non-residents under Deduction of tax at source from non-resident’s income :

According to section 195(1) any person who is responsible for paying to a non -resident any interest or any other sum (not being interest referred to in section 194LB or 194LC or 194LD or salaries) chargeable to income-tax under the Income-tax Act, 1961, must, at the time of credit of such income to the account of the payee or at the time of making the payment thereof in cash or by the issue of a cheque or draft or any mode, whichever is earlier, deduct income tax payable thereon at the rates in force.

Section 195(2) provides that in cases where the person is responsible for paying any sum chargeable to income-tax in India to a non-resident and he considers that the whole of the amount of payment may not be income assessable to tax in the hands of the recipient, he may make an application to the Assessing Officer to determine, by a general or special order, the appropriate proportion of the sum payable as being chargeable to tax and thereby obtain an advance ruling from the Assessing Officer with regard to the income assessable and the tax payable thereon. If that is done, the tax shall be deducted under section 195(1) only in that proportion in which the payment to the non-resident becomes taxable in India.

In this context, it may be noted that section 40(a)(i) provides for disallowance of any interest, royalty, fees for technical services or other sum chargeable under this Act, which is payable, –

(a) outside India;

(b) in India to a non-resident, not being a company or to a foreign company,

on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted or, after deduction, has not been paid during on or before the due date of filing of return. It is also provided that in respect of any such sum, where tax has been deducted in any subsequent year, or has been deducted in the previous year but paid after the due date of filing of return under section 139(1), such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.