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of <h1>Non-compliance with Section 195: Tax on payments to non-residents must be grossed-up, not net. Avoid penalties.</h1> The circular addresses the issue of non-compliance with Section 195 of the Income-tax Act, 1961, regarding tax deductions at source for payments to non-residents when the tax is borne by the payer. It reiterates instructions from a previous circular, emphasizing that the tax should be calculated on the grossed-up amount, not the net payment. The circular reminds payers to deduct and remit the correct tax amount to the Central Government promptly to avoid interest, penalties, and legal consequences under sections 201(1A), 221, and 276B of the Act.
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