Deduction of tax at source under section 195 of the Income-tax Act, 1961, from payments to non-residents where tax is to be borne by the payer—Clarification regarding

Tax withholding obligation requires grossing up when payer bears non-resident tax and payment to government.

Where a payer undertakes to bear a non-resident's tax, the payer must compute the recipient's taxable income by grossing up the net payment and deduct tax on that grossed up amount at source each time a payment is made, and remit the deducted tax to the credit of the Central Government without withholding on the premise of later payment on assessment.