Application by payee for certificate authorising receipt of interest and other sums without deduction of tax

Who may apply, and for what (sub-rule 1). A person entitled to receive interest or other sums of the nature in section 393(2) [Table: Sl. No. 17] may apply in Form No. 126 for a certificate under section 395(1), if it meets the conditions below.

• Banking company or insurer (as defined in section 2(9)(d) of the Insurance Act, 1938) that is not a domestic company and operates in India through a branch. It may receive without deduction any interest, not being interest on securities (other than interest payable on securities referred to in section 393(4) [Table: Sl. No. 6]), or any other sum, not being dividends. Conditions: (a) it has been regularly assessed in India and has furnished returns for the last five tax years for which returns fell due on or before the date of application; (b) it is not in default, or deemed in default, for any tax (including advance tax and tax under section 266), interest, penalty, fine or other sum under the Act; and (c) the interest or sum is receivable by the branch on its own account, not on behalf of its head office, a branch outside India or anyone else.
• Any other person carrying on business or profession in India through a branch. It may receive without deduction any sum not being interest or dividends. Conditions: those for the first category; business or profession carried on in India continuously for not less than five years immediately before the application; and the value of fixed assets in India of that business or profession, as shown in the books for the tax year ended immediately before the application (or the year before, if those accounts are not yet made up), exceeds fifty lakh rupees.

Validity and renewal (sub-rules 2 and 3). The certificate is valid for the tax year specified in it, unless the Assessing Officer cancels it before that year expires. A fresh application may be made after the earlier certificate expires, or within three months before its expiry.