All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

India: Administrative notifications prescribe additional reporting requirements in certain cross-border situations

nayak-rajendra.jpg

jain-aastha.jpg

Rajendra Nayak and Aastha Jain, EY

The Central Board of Direct Taxes, the apex administrative authority of direct taxes in India, recently issued notifications prescribing additional reporting requirements under two circumstances, firstly, by a non-resident (NR) taxpayer to claim benefit under a tax treaty and secondly, by a person (remitter) responsible for making payments to a NR (recipient) which are chargeable to tax in India.

Under the Indian Tax Law (ITL), a NR taxpayer is required to furnish a tax residency certificate (TRC) along with other prescribed information in order to claim any relief/ benefits under a tax treaty. In this regard, the first notification prescribes additional information to be provided in the given format. It requires details in relation to the taxpayer status (individual/firm/company) , nationality (in case of individual) or country or specified territory of registration (in case of others), tax identification number in country of residence, permanent account number in India (if allotted), address, period of residence where such details are not contained in the TRC. Further, the taxpayer is required to keep and maintain such documents as are necessary to substantiate the information provided. This notification is applicable from tax-year 2012-13.

As per the provisions of the ITL, a remitter making payment of any sum chargeable to tax to a NR is required to withhold tax at source at the prescribed rates. To track remittance of such payments and to expedite tax recovery, the remitter is required to furnish certain information electronically in prescribed form and manner. The second notification amends existing rules to provide for a new format and manner of furnishing information in respect of all such taxable payments made to an NR. The scope of covered payments is expanded to payments including salary, interest on external commercial borrowings, income of sportsmen/sports associations, income from transfer of foreign currency units held by offshore funds, income from foreign currency bonds/shares of Indian companies, income of foreign institutional investors from securities and income from lottery/crossword puzzle/horse race. The revised rules provide for furnishing of detailed information in two formats: (i) part A for small value payments not exceeding INR50,000 ($800) and aggregate not exceeding INR 250,000 during the tax year (ii) part B for any other payments not covered under part A. The requisite information covers details about the remitter, recipient, payment, bank (making remittance). The information sought under part B is more expansive (including details about the taxability of payment under the ITL/tax treaty, TRC) and it needs to be based on a certificate obtained from a chartered accountant or tax withholding orders obtained from Indian tax authorities. Further, the revised rules exempt a list of payments, which are mainly capital/ personal in nature, from the reporting requirements. This notification comes in effect from October 1 2013.

These recent notifications highlight a trend with the Indian tax administrators to enhance, broaden the base and strengthen the mechanism of collecting information in cross-border situations and to enable more stringent tax/withholding enforcement on these transactions.

Rajendra Nayak (rajendra.nayak@in.ey.com) & Aastha Jain (aastha.jain@in.ey.com)

EY

Tel: +91 80 4027 5275

Website: www.ey.com/india

more across site & bottom lb ros

More from across our site

This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree