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TMI BlogClarification 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 payerX X X X Extracts X X X X X X X X Extracts X X X X ..... sions 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), the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith rule 30 and should not be withheld on the ground that the tax will, in any case, be paid by the person making the payment ultimately when regular assessments are made in the case of non-resident payee. 5. Failure to deduct tax or failure to pay the tax as required by the provisions of the Income-tax Act would render a person liable to penalty under section 201 read with section 221. In addition he would also be liable under section 201(1A) to pay simple interest at 12 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Attention is also invited to section 276B, wherein it is provided that if a person without reasonable cause or excuse fails t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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