Direct Tax Laws & International Taxation · Non Resident Taxation

Certificate for Appropriate Proportion of Sum Payable (Section 214)

Updated 5 October 2026 · Fact-checked

Section 214 lets a payer who is unsure how much of a non-salary payment to a non-resident is chargeable to tax apply for a certificate. The authority determines the appropriate proportion that is chargeable. The payer then deducts tax under section 395(2) or 400(3) only on that proportion, not on the whole sum.

Understand Certificate for Appropriate Proportion of Sum Payable (Sec 214)

When you pay a non-resident a sum that is not salary, the law normally requires you to deduct tax at source. The risk is that the whole payment may not be income chargeable in India. A payment can mix a taxable element, such as services rendered in India, with a non-taxable element, such as a reimbursement or a supply made outside India.

If you deduct tax on the whole sum, the non-resident is over-taxed. If you deduct too little, you can be treated as a defaulter. Section 214 solves this. It lets the payer apply to the tax authority to determine the appropriate proportion of the sum that is chargeable to tax.

Once the authority passes its order, the certificate fixes the portion on which tax is to be deducted. You then deduct tax under section 395(2) or 400(3) on that portion only. The certificate gives you a safe basis for the deduction.

The key points to remember are these:

The applicant is the payer, not the non-resident.
It covers sums payable to a non-resident that are not salary.
It deals with how much of the sum is chargeable. It does not deal with the rate.
It works on a proportion. It is not a flat exemption.

Do not confuse it with the payee's own application for a lower or nil deduction certificate. There, the person receiving the income applies, and the focus is on the rate or on no deduction. Under section 214, the payer applies and the focus is on the chargeable proportion.

Key rules to remember

Who applies: Payer (person responsible for paying) → authority → certificate of appropriate proportion; The application is made by the payer. The non-resident payee is not the applicant under this section.
Scope of payment: Non-salary sum payable to a non-resident, where tax is deductible under section 395(2) or 400(3); Salary payments are outside this section. Check the nature of the payment first.
Chargeable amount: Chargeable sum = Total sum payable × appropriate proportion determined; The proportion comes from the authority's certificate. Do not estimate it yourself in the answer.
Tax to deduct: Tax to deduct = Chargeable sum × rate applicable to that income; The certificate fixes the proportion. The rate is the rate in force for that income, as given in the question. Add surcharge and cess only if the question says so.

How to solve Certificate for Appropriate Proportion of Sum Payable (Sec 214) questions

Use this order for any question on the certificate for the appropriate proportion of a sum payable to a non-resident.

1Identify the payee and the payment. Confirm the payee is a non-resident and that the sum is not salary.
2Split the payment into its components. Mark which parts could be income chargeable in India and which could not, such as reimbursements or supplies outside India.
3Identify the problem. If the payer is unsure what part is chargeable, section 214 applies. If the payee wants a lower rate or nil deduction, that is a different provision.
4State who applies and to whom. The payer applies to the tax authority for a certificate of the appropriate proportion.
5State the effect. The authority's certificate fixes the proportion on which tax is deducted under section 395(2) or 400(3).
6Compute. Take the proportion of the total sum, then apply the rate given in the question. Show each line.
7Conclude. Say that deduction on the whole sum without the certificate would over-deduct, and that the payer deducts only on the certified proportion.

Quickest way: Four-line answer frame

When to use it: Use it for short written answers and for case MCQs where you only need to pick the correct treatment.

Line 1: Payment is to a non-resident and is not salary, so tax deduction applies.
Line 2: The payer thinks only part of the sum is chargeable, so the payer applies under section 214.
Line 3: The authority certifies the appropriate proportion, and tax is deducted under section 395(2) or 400(3) on that proportion only.
Line 4: Compute as total sum × proportion × rate, and close with the amount of tax.

Common mistakes in Certificate for Appropriate Proportion of Sum Payable (Sec 214)

Saying the non-resident applies for the certificate.
Students mix this section with the payee's lower or nil deduction certificate.
Fix: Write 'payer' first. Under section 214 the person making the payment applies.
Treating the certificate as a change of tax rate.
Both certificates reduce the tax actually deducted, so they look alike.
Fix: Remember that section 214 fixes the chargeable proportion. The rate is applied separately to that proportion.
Applying the section to salary payments.
Students forget the non-salary limit.
Fix: Check the nature of the payment in the case facts. Only a non-salary sum to a non-resident qualifies.
Deducting tax on the whole sum even after the certificate is issued.
Students stop at the gross payment and skip the proportion step.
Fix: Always show the chargeable portion as a separate line before computing tax.
Choosing the proportion on your own in the computation.
Students think the payer can fix a convenient percentage.
Fix: Use the proportion given in the certificate or order. If the question gives no proportion, say it is to be determined by the authority.
Quoting section numbers loosely, such as writing 195(2) from the old Act.
Students carry forward habits from the 1961 Act.
Fix: Use only the 2025 Act numbers: section 214 for the certificate and sections 395(2) and 400(3) for the deduction.

Worked examples

Example 1

An Indian company agrees to pay a non-resident contractor ₹50,00,000 under one contract. The contract covers equipment supplied from outside India and installation work done in India. The company is unsure how much of the sum is chargeable to tax in India. The authority later certifies that 30% of the sum is chargeable. Assume the applicable rate is 20%, with no surcharge or cess. What should the company have done, and how much tax is to be deducted?

Show the solution

The payee is a non-resident and the payment is not salary, so tax deduction applies.
The payment mixes a possibly non-chargeable part (supply outside India) with a chargeable part (installation in India). The payer is unsure of the chargeable portion.
The company, as payer, applies under section 214 for a certificate of the appropriate proportion.
The authority certifies 30%. Chargeable sum = ₹50,00,000 × 30% = ₹15,00,000.
Tax to deduct = ₹15,00,000 × 20% = ₹3,00,000, deducted under section 395(2) or 400(3) as applicable.

Answer: The company applies under section 214 and deducts tax of ₹3,00,000 on the certified chargeable portion of ₹15,00,000. Deduction on the full ₹50,00,000 would have been ₹10,00,000, which is an over-deduction.

Example 2

An Indian firm owes a non-resident consultant ₹12,00,000. Of this, ₹2,00,000 is a reimbursement of actual out-of-pocket costs. The firm believes only part of the sum is chargeable to tax. The payee, meanwhile, wants to ask for a lower rate. Who must apply under section 214, and if the authority certifies 40% as chargeable, what tax is deducted at an assumed rate of 10%, with no surcharge or cess?

Show the solution

Section 214 is a payer's application. The firm, as the payer, must apply. The consultant's request for a lower rate is a separate matter and is not a section 214 application.
The sum is not salary and is payable to a non-resident, so the section is available.
Chargeable sum = ₹12,00,000 × 40% = ₹4,80,000.
Tax to deduct = ₹4,80,000 × 10% = ₹48,000.
The remaining ₹7,20,000 is not part of the chargeable portion, so no tax is deducted on it.

Answer: The firm applies under section 214. On the certified 40% proportion (₹4,80,000), tax of ₹48,000 is deducted.

Exam tips

Begin every answer by naming the payer as the applicant. Many marks are lost on this point.
In case MCQs, look for words such as 'payer is unsure how much is chargeable'. They point to section 214.
Show the proportion step as its own line in computations. Examiners give marks for it.
Quote only sections 214, 395(2) and 400(3) as given. Do not add section numbers you are unsure of.
State clearly that salary is outside this section if the facts include any salary-like payment.

Practice questions from Non Resident Taxation

Certificate for Appropriate Proportion of Sum Payable (Sec 214): frequently asked questions

Who applies for the certificate under section 214?

The payer applies. This is the person who is to make the non-salary payment to the non-resident. The non-resident payee is not the applicant under this section.

What does the certificate decide?

It decides the appropriate proportion of the sum payable that is chargeable to tax. The payer deducts tax under section 395(2) or 400(3) on that proportion only.

Is the section 214 certificate the same as a lower deduction certificate?

No. A lower or nil deduction certificate is sought by the payee and deals with the rate or with no deduction. Section 214 is sought by the payer and fixes the chargeable proportion of the sum.

Does section 214 apply to salary paid to a non-resident?

No. It covers a sum payable to a non-resident that is not salary. Salary follows its own deduction rules.