Clarification contained in Circular No. 155, dated 21-12-1974 reiterated to ensure proper computation of tax to be deducted at source in the case of non-resident whose tax liability is to be borne by payer

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....payment, the provisions of section 195 are not being followed. As a result such persons become liable to pay interest and penalty under section 201(1A) and section 221, respectively and also punishment under section 276B. 2. Board's Circular No. 155, dated 21-12-1974 [Clarification 2] outlines the method of computation of tax to be deducted at source under section 195 in the case of a non-resident, whose tax liability is to be borne by the payer and its payment to the credit of the Central Government. Paras 2, 3 and 4 of this circular are reproduced below : "2. Where the amount payable to a non-resident is stipulated to be paid to him net of tax (i.e., where the tax payable by the non-resident is borne by the person making the payment....

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....195 at the time of payment of non-residents and after deduction, such tax is paid to the credit of the Central Government within the prescribed time. Circular: No. 370 [F.No. 391/3/78-FTD], dated 3-10-1983. CLARIFICATION 2 1. Section195 imposes a statutory obligation on any person responsible for paying to a non-resident, any interest (not being "interest on securities") or any other sum (not being dividends) chargeable under the provisions of the Income-tax Act, to deduct income-tax at the rates in force unless he is himself liable to pay income-tax thereon as an agent. Payments to a non-resident by way of royalty and payments for technical services rendered in India are common examples of sums chargeable under the provisions of t....