Amendment of section 115A.
47. In section 115A of the Income-ta
(I) in sub-section (1), in clause (a), the words, figures and letter “other than dividends referred to in section 115-O” at both the places where they occur, shall be omitted with effect from the 1st day of April, 2021;
(II) in sub-section (5),––
(i) in clause (a), for the word, brackets and letter “clause (a)”, the words, brackets and letters “clause (a) or clause (b)” shall be substituted;
(ii) for clause (b), the following clause shall be substituted, namely:––
“(b) the tax deductible at source under the provisions of Part B of Chapter XVII has been deducted from such income and the rate of such deduction is not less than the rate specified under clause (a) or, as the case may be, clause (b) of sub-section (1).”.
Notes on Clauses:
Clause 47 of the Bill seeks to amend section 115A of the Income-tax Act relating to tax on dividends, royalty and technical service fees in the case of foreign companies.
The said section, inter alia, provides for taxation of dividend excluding dividends referred to in section 115-O. It is proposed to omit the reference of dividends referred to in section 115-O so that all dividend income is taxed in the hands of non-resident (not being a company) or a foreign company.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
Sub-section (1) of the said section provides for the determination of tax in case of a non-resident whose total income consists of dividends or interest payments as specified in clause (a) of the said sub-section and royalty or fees for technical services as specified in clause (b) of the said sub-section.
Sub-section (5) of the said section provides that a non-resident will not be required to furnish its return of income under sub-section (1) of section 139 of the Income-tax Act, if the conditions in clause (a) and clause (b) of said subsection are satisfied.
The condition under clause (a) of said sub-section requires that the total income of a non-resident should consist only of income in the nature of dividends or interest as referred to in clause (a) of sub-section (1) of the said section.
It is proposed to amend clause (a) of the said subsection so as to provide that the total income of the non-resident should consist only of the income in the nature of dividend or interest as referred to in clause (a) of sub-section (1) of the said section or income in the nature of royalty or fee for technical services as referred to in clause (b) of subsection (1) of the said section.
The condition under clause (b) of said sub-section requires that the tax deductible at source on such income as referred to in clause (a) of sub-section (1) of the said section has been deducted as per the provisions of Part B of Chapter XVII of the Income-tax Act.
It is further proposed to amend clause (b) of the said sub-section so as to provide that the tax deductible at source on income referred to in clause (a) or clause (b) of subsection (1) of the said section, has been done under the provisions of Chapter XVII at the rates which are not less than the rate specified under clause (a) or clause (b) of subsection (1) of the said section.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
