Amending the Income Tax Rules

in Tax, 12.08.2013

Although the Indian Budget proposal was presented on 28 February 2013, several specifications and additional changes have been communicated in the meantime. On 1 August 2013, the Central Board of Direct Taxes issued a notification amending the Income Tax Rules, prescribing the additional information required to be furnished by non-residents along with the Tax Residency Certificate.

The impact of the changes in the Indian Tax law on multinational companies doing business in India include several important factors which shall be outlined in a series of articles published on this Blog. My articles published in March and June 2013 covered several important factors that affect multinational companies doing business in India.

Introduction

The Finance Act 2012 had provided that in order to be eligible to claim relief under the tax treaty, a taxpayer is required to produce a Tax Residency Certificate (TRC) issued by the Government of the respective country or the specified territory in which such taxpayer is resident, containing certain prescribed particulars. Subsequently, the Central Board of Direct Taxes (CBDT) prescribed the details to be included in the TRC.

The Finance Act 2013 has done away with the requirement of obtaining prescribed particulars in the TRC. In other words, the taxpayer can continue to obtain the TRC as issued by the foreign authorities. The Finance Act, 2013 also introduced a provision to clarify that the taxpayer shall now be required to furnish such other information or document as may be prescribed.

Details required to be furnished

The CBDT has now issued a notification amending the Income-tax Rules 1962 (the Rules, Rule 21AB of the Income Tax Rules 1962) prescribing the additional information required to be furnished by non-residents along with the TRC. The details are required to be furnished in Form 10F.

The details required to be furnished are as follows:

  • Status (individual, company, firm etc.) of the taxpayer
  • Permanent Account Number (PAN) of the taxpayer if allotted
  • Nationality (in case of an individual) or country or specified territory of incorporation or registration (in case of others)
  • Taxpayer’s tax identification number in the country or specified territory of residence and in case there is no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory of which the taxpayer claims to be a resident
  • Period for which the residential status, as mentioned in the TRC, is applicable; and
  • Address of the taxpayer during the period for which the certificate is applicable

The CBDT has clarified that the additional information prescribed may not be required to be provided if it already forms a part of the TRC.

The taxpayer shall be required to keep and maintain the documents which are necessary to substantiate the above information. Further, an income-tax authority may ask for the said documents from the taxpayer in relation to a claim of benefit under the tax treaty.

These rules shall be deemed to have come into force with effect from 1 April 2013.

Comments

The requirements that were earlier mentioned in the TRC have now been mandated for the non-resident taxpayers to be submitted along with the TRC obtained from the respective Government. We hope the prescribed information submitted with the tax authorities would be sufficient and the non-resident taxpayer would be able to claim tax treaty benefits without much difficulty.


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