TDS Return Default for Foreign Party Without PAN – Need Guidance

[Ramanathan Seshan]

Dear Experts,

We have a case involving a foreign vendor who does not have a PAN. While filing the quarterly TDS return (Form 27Q) using the NSDL FVU utility, we encountered an error that prevented the generation of the FVU file—even though we provided the vendor’s email ID, Tax Identification Number (TIN), contact number, and address.

To proceed, we selected 'C – Higher Rate of TDS may be applicable due to non-availability of PAN' under the remarks column. This allowed us to generate the FVU file. However, as per provisions of the Act higher deduction does not apply to non-residents without PAN. As a result of we tagging 'C', we received a default in the TDS return for short deduction of TDS.

Now, when we try to remove the remark through the TRACES portal, it does not allow us to make the change, and the default still persists.

Has anyone faced a similar issue? Is there any way to resolve this—perhaps by submitting a written representation to the department? If so, to whom should it be addressed?

Regards,

S Ram

AI Summary

Foreign Vendor TDS Compliance: Navigating Identification Challenges with Non-Resident Exemption Under Rule 37BC A foreign vendor without a PAN created challenges during TDS return filing. The NSDL utility required selecting a remark indicating higher TDS, despite Rule 37BC allowing exemption for non-residents providing specific identification details. The system generated a default for short deduction, and the TRACES portal prevented remark removal. Recommended resolution strategies include filing a correction return, submitting justification documents, and potentially contacting the jurisdictional TDS Assessing Officer.