What if you fail to deduct TDS while making payment to foreign Nationals

CBDT guidelines for failure to deduct TDS while making payment to foreign nationals and companies u/s 195

Clarification has been sought by field officers as to whether the tax is to be deducted (under sub section (1) of section 195) on the whole sum being remitted to non-resident or only portion of representing the sum chargeable to tax, particularly if no application has been made (under subsection (2) of section 195 of the act) to determine the sum.

The matter has been examined in the board and accordingly, in exercise of powers vested under section 119 of the act, the board hereby directs that in case where the assesse fails to deduct tax under section 195 of the act, the assessing officer shall determine the appropriate proportion of the sum chargeable to tax as mentioned in subsection (1) of section 195 to ascertain tax liability on which deductor  shall be deemed to be assesse in default under section 201 of the act , and the appropriate proportion of the sum will depend on the facts and the circumstances of each case taking into account nature of remittances, income component therein or any other fact relevant to determine such appropriate proportion.