Income-tax Act,1961
Act No : 43
Section :
Other sums 1.
195. Other sums1 2[(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" 3[* * *]) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :4 5[Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode.] Explanation.-For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest Payable Account" or "Suspense Account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] (2) Where the person responsible for paying any such sum chargeable under this Act (other than 6[* * *] interest on securities, 7[* * *] and ------------------------------------------------------------------- 2 Substituted by the Finance Act, 1987, w.e.f. 1-6-1987. Prior to the substitution, subsection (1), as amended by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1975, w.e.f. 1-4-1975, read as under: "195. Other sums.-(1) Any person responsible for paying to a non-resident, not being a company, or to a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India any interest, not being "Interest on securities", or any other sum, not being dividends, chargeable under the provisions of this Act, shall, at the time of payment unless he is himself liable to pay any income-tax thereon as an agent, deduct income-tax thereon at the rates in force: Provided that nothing in this sub-section shall apply to any payment made in the course of transactions in respect of which a person responsible for the payments is deemed under the proviso to sub-section (1) of section 163 not to be an agent of the payee." 3 The words "or dividends" omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 5 Inserted by the Direct Tax Laws (Second Amendment) Act, 1989, w.r.e.f. 1-6-1987. 6 The words " or dividends" omitted by the Finance Act, 1976, w..e.f. 1-6-1976. 7 The words ", dividend" omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. --------------------------------------------------------------------- 1.630 salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application1 to the 2[Assessing] Officer to determine, 3[by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable: 4[Omitted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.] 5[(3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the 6[Assessing] Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that subsection, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub- section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the 7[Assessing] Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. 1.631 2. Import of software.-Where a tax payer engaged in the business of export of software for computer application, imports any systems software, supplied by the manufacturer of the computer hardware along with the hardware itself, the lump sum payment made to the foreign supplier for acquisition of any right in relation to or for use of such systems software will not be liable to tax in India as payment by way of royalty or otherwise. Such lump sum payments will be allowed to be made without deduction of tax at source. 3. Payments to non-residents.-Where the amount payable to a non-resident is stipulated to be paid to him net of taxes the income chargeable to tax in the hands of the recipient is determined by grossing up the net of tax payment to such an amount as would after deducting the tax on such gross amount leave the stipulated net amount of income. Accordingly the sum chargeable to tax in the hands of the non-resident recipient would be this grossed up amount and it is with reference to this grossed up amount that tax has to be deducted as required by section 1985. 4. Where the person responsible for paying any sum to non- resident considers that the whole amount thereof would not be chargeable in the case of the recipient non-resident, he may make an application to the ITO for the determination of the appropriate portion of such payment which would be taxable and the respect of which tax is to be deducted at source . 1[195A. Income payable "net of tax" Where, under an agreement or other arrangement, the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then, for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement.]
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