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CA Final · Direct Tax Laws & International Taxation · Non Resident Taxation

Zenith Imports Pvt Ltd plans to pay a non-resident supplier a sum of which only part is chargeable to tax in India. It applies in Form No. 129 for a certificate to determine the appropriate proportion chargeable. Under Rule 214 of the Income-tax Rules, 2026, which statement is correct?

The certificate is valid only for payments to the non-resident named in it and only for the period of the tax year specified in it, unless the Assessing Officer cancels it earlier. It is not a general certificate for other recipients or for the whole year.

  1. AThe certificate remains valid for any payment to any non-resident until cancelled
  2. BThe certificate is valid only for the named non-resident and for the period of the tax year specified in it, unless cancelled earlier by the Assessing OfficerCorrect
  3. CThe certificate is valid for the entire tax year regardless of any period specified in it
  4. DThe certificate can be issued only after the tax is paid, ignoring the recipient's past tax history

Explanation

Rule 214(4) says the certificate is valid only for payment to the non-resident named in it and for the specified period of the tax year, unless the Assessing Officer cancels it before expiry. Hence a certificate valid for any non-resident is wrong. The Assessing Officer also considers estimated income of the year and the preceding four tax years under Rule 214(3).

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