Non residents exempted from deducting income tax from money received from overseas

The Central Board of Direct Taxes vide notification dated the 17th August, 2022 has notified that the provisions of sub-section (1G) of section 206C of the Income Tax Act shall not apply to a person (being a buyer) who is a non-resident in terms of the Act and who does not have a permanent establishment in India. Sub-section (1G) of section 206C of the Act provides the following:

The Every person,—

(a) being an authorised dealer, who receives an amount, for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the Reserve Bank of India;

(b) being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package,

shall, at the time of debiting the amount payable by the buyer or at the time of receipt of such amount from the said buyer, by any mode, whichever is earlier, collect from the buyer, a sum equal to five per cent of such amount as income-tax.

The CBDT has clarified that a non-resident Indian receiving an amount from an overseas buyer under the Liberalised Remittance Scheme is exempted from collecting income tax from the buyer.