Recent changes in the procedure for furnishing Form 10F

Non-resident taxpayers are required to furnish a Tax Residency Certificate (TRC) issued by the tax authorities of their country of residence as proof of their residence in the said country. TRC provides information such as nationality, status, tax period, tax identification number, and address of the non-resident taxpayer. If any of the prescribed information is not available in the TRC, then the non-resident is required to furnish Form 10F providing the requisite details for claiming benefits under the Double Taxation Avoidance Agreement (DTAA). TRCs issued by tax authorities of most countries don’t contain all the details. Due to this, Form 10F is required to be furnished in most cases.

Form 10F is an income tax form that needs to be provided to persons who are responsible for deducting income tax while making payments to such non-residents. It is also shared with the Chartered Accountant who is certifying the withholding tax in Form 15CB under section 195(6) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act) read with rule 37BB Income-tax Rules, 1962 (hereinafter referred to as ‘the Rules’), for payments to non-residents. This form can be called by the tax department as and when required either in proceedings about TDS assessment or income tax assessment.

Online filing of Form 10F

Earlier, no procedure was prescribed for furnishing Form 10F. However, now the tax authorities, via?Notification No. 03/2022 dated 16.07.2022, have required non-resident taxpayers to electronically furnish Form?10F.?TRC is also required to be attached while e-filing Form 10F.

If one needs to file Form 10F electronically, one is required to create a login ID and password on the income-tax portal, for which obtaining a Permanent Account Number (‘PAN’) is mandatory.

Further, Rule 131 of the Rules, which deals with the procedure for electronic filing of forms, returns, statements, etc., requires the forms to be signed either through a Digital Signature Certificate (DSC) or through an Electronic Verification Code (EVC) of the authorized signatory. Therefore, along with the non-resident taxpayer’s PAN, the authorized signatory of such non-resident (who generally is a non-resident), would also be required to obtain a PAN-based DSC in India and will therefore be required to obtain PAN in India. This has resulted in a lot of practical challenges for the non-resident taxpayers, their respective authorized signatories, and resident tax deductors, who are required to ensure all relevant documents are furnished by the non-resident taxpayer while complying with the withholding tax provisions under section 195 of the Act.

This requirement created a hurdle for non-resident taxpayers who otherwise were not required to obtain PAN in India. This provision also bypassed the exemption provided to non-resident taxpayers from obtaining PAN, as per Section 206AA of the Act read with Rule 37BC of the Rules.?(Read also:?Operational Risks faced by manufacturing companies)

Relaxation to non-resident tax-payers not holding PAN/ not required to hold PAN in India

Considering the above-stated practical challenge being faced by non-resident tax-payers, the tax authorities, via?Notification No. F. No. DGIT(S)-ADG(S)-3/ e-Filing Notification/ Forms/ 2022/ 9227 dated 12th?December 2022, have now provided relaxation to certain types of non-resident tax-payers. The tax authorities have notified that those non-residents who are not having PAN and are not required to have PAN as per relevant provisions of the Act are?exempted?from mandatory electronic filing of Form 10F till 31st?March 2023. Such taxpayers are required to continue filing Form 10F till 31st?March 2023 in manual form as was done before the notification for online filing of Form 10F.

This notification provides substantial relief to the non-resident tax-payers not having/ not required to have PAN in India as per the provisions of the Act.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise.?AKGVG & Associates?does not intend to advertise its services through this.

Posted by

CA Ruchika Gupta

AKGVG & Associates