As per the current Income tax provisions, PAN is required to be furnished by all the taxpayers including non-residents to the deductors to avoid higher withholding tax than the prescribed rate on the income on which tax is deductible.

In order to reduce compliance burden, it was proposed by FM Arun Jaitley in his Budget 2016 speech to exempt the non-residents from furnishing of PAN subject to such conditions as may be prescribed. As per Finance Minister’s Budget speech, higher withholding tax rate will not apply on furnishing of alternative documents.

Making it official, The CBDT vide Notification No. 53/2016 dated 24 June, 2016 has documented this exemption. Provisions of Sec 206AA shall not apply in respect of payments in the nature of:

1. Interest,
2. Royalty,
3. Fees for technical services and
4. Payments on transfer of any capital asset,

TDS at higher rate of 20% will not be deducted for the above specified payments if following information are provided by non-residents:-

1. name, e-mail id, contact number;
2. address in the country of which the non-resident is a resident;
3. Tax Residency Certificate (TRC) from the Government of that country if the law of that country provides for issuance of such certificate;
4. Tax Identification Number (TIN) or any other Unique Identification Number of the non-resident of his residence country.

All the above information needs to be furnished in TDS returns as well.

Download a copy of the circular here: CBDT notification on non-applicability of PAN by Non-residents

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