TaxTMI 
TaxTMI 
Question - What are the proposed changes in the case of non- resident being a person engaged in the business of banking regarding the interest received in certain cases ?
Rationalisation measures - Clarity regarding source rule in respect of interest received by the non-resident in certain cases
28 Feb 2015 
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Taxability of interest: interest paid by a banking permanent establishment to head office deemed sourced and taxable in India.
The proposal amends domestic law to deem that, for a non-resident engaged in banking, interest payable by its Indian permanent establishment to the head office, other permanent establishments or any part outside India shall be treated as accruing or arising in India and chargeable to tax; the PE will be deemed separate and independent for computation of income and will be required to deduct tax at source on such payments, with non-deduction resulting in disallowance and potential interest and penalty. (AI Summary)
The proposal amends domestic law to deem that, for a non-resident engaged in banking, interest payable by its Indian permanent establishment to the head office, other permanent establishments or any part outside India shall be treated as accruing or arising in India and chargeable to tax; the PE will be deemed separate and independent for computation of income and will be required to deduct tax at source on such payments, with non-deduction resulting in disallowance and potential interest and penalty. (AI Summary)