Obligation to avail DTAA benefits

Tax image




1. This section override all other section of Income Tax Act,

2. Any person (resident or non-resident) receive any sum or income on which TDS is deductable, then

3. Such person shall provide PAN No to person responsible to deduct such tax.

4. If he fails then higher of following shall be charged

a) Rate as applicable for that part of income under Chapter XVIIB (TDS rate )

b) Rate in force (rate as specified in act)

c) 20%

Rule-37BC of Income Tax Rules 

(1)    In the case of a non-resident, not being a company, or a foreign company (hereafter referred to as ‘the deductee’) and not having permanent account number the provisions of section 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset, if the deductee furnishes the details and the documents specified in sub-rule (2) to the deductor 


1. This rule is applicable only for Non-resident and who does not have PAN number.

2. Person having PAN and not providing same then this Rule is not applicable.

3. Section 206AA shall not apply mean tax shall not be deducted at higher in want of PAN.

4. Although TDS shall be continue to be deducted at the rate specified in the relevant provision of this Act

5. This relaxation is given only for payment in nature of Interest, Royalty, FTS and payment on transfer of Capital asset.

6. Section 206AA shall continue to apply in case of payment in nature of Salary , Pension, Business profit, Dividend , Director Fees, Artistes and sportspersons or any other payment except Interest, Royalty, FTS and payment on transfer of Capital asset

Section 206AA shall not apply only when Non-resident provide information as specified in sub-rule-2 under

Now, what will be requirement of PAN in case of transaction with DTAA or Non-DTAA countries parties?

Here is checklist for you

S. No. Country Nature of Payment PAN provide Tax Rate
1 DTAA Royalty No/Yes In both cases (Yes or No) As per DTAA or IT Act whichever is beneficial to deductee
Fees for Technical Services (also included fees for included services
Payment on transfer of Capital asset
Other Yes If provides then Rate as per DTAA or IT Act whichever is beneficial to deductee
No If not provides then Rate as per section 206AA(1)
2 Non-DTAA Royalty No/Yes In both case (Yes or No) Rate applicable as per IT Act under concern section
Fees for Technical Services (also included fees for included services
Payment on transfer of Capital asset
Other Yes Rate applicable as per IT Act under concern section.
No If not provides then Rate as per section 206AA(1)



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