According to the new Central Board of Direct Taxes (CBDT) rule 37BC, Non-resident companies including even the NRIs need no longer to furnish PAN numbers in India to claim TDS benefits. The NRIs include foreign partnerships, foreign body corporates, and foreign companies.
The CBDT has inserted a new Rule, 37BC, which provides relaxation to non-residents from furnishing PAN number in India while claiming TDS benefits. As per the new law, the NRIs can now claim benefits of the tax treaty by just providing personal details such as names, email ID, address etc; Tax Residency Certificate and Tax Identification Number, as well as any other Unique Identification Number obtained in the country of residence.
Earlier, PAN was mandatory for every non-resident for obtaining tax benefit as Section 206AA of I-T Act provided that in absence of PAN, the payer shall be liable to withhold taxes at the rate of 20% or the rate of tax as per the Act or that as per tax treaty (whichever is higher) while making payment to a non-resident.
Also, prior to the present change, no TDS certificates could be generated in absence of PAN and thus apart from suffering a higher withholding, the non-residents were encountering difficulty in claiming tax credit in their country of residence.
However, the analysts say that it still remains to be seen whether appropriate changes are also provided to the TRACES system (TDS management system of the Income tax department) to address such anomalies.