2 Objective of Section 195 Section 195 deals with deduction of tax at source from payments to Non- residents and Foreign Companies Objective – to ensure tax liability is recovered through deduction at source itself – Tax Department is not troubled to recover tax from a non-resident whose India connection may be transient or whose assets in India may not insufficient No threshold limit prescribed – tax deductible even on a negligible amount of credit / payment Tax on the gross amount / income element – no finality Deductor has option to approach the Assessing Officer (AO) to determine the income element Does not apply to salaries, interest on securities and exempt dividends Section 2(37A)(iii) – Benefit of Tax Treaty Available
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