The Hindu Business Line : TDS norms on payments to non-residents may be modified

THE Finance Ministry may allow persons deducting tax at source (TDS) on certain payments made to non-residents to claim refund of the excess amount deposited with the Government on account of wrong application of the tax rate.

"We have not so far taken care of the situation where the TDS rate has been wrongly applied in the payments to non-residents. We will look into this and if required modify the existing procedure that is already available for claiming refunds," Mr A.J. Majumdar, Joint Secretary (foreign tax division), Finance Ministry, told Business Line here.

Currently, a person deducting tax under Section 195 of the Income-Tax Act is permitted to claim refund of TDS when the contract is cancelled and no remittances are made to the non-resident or when the remittance is duly made to the non-resident, but the contract is cancelled.

Mr Ved Jain, Co-Chairman of Assocham Committee on Direct Taxes, said that the revenue department might look at putting in place sufficient safeguards before allowing a deductor to claim refund of TDS on account of wrong application of TDS rate.

"The safeguards could be in the form of an indemnity bond or an undertaking from the deductor that the department would be indemnified from any possible loss on account of any separate claim of refund of the same amount by the non-resident," he said.