Rule 40G & Form No. 29D: Application before AO for refund of TDS paid (Grossed up) where it was not deductible u/s 195 (other than Interest)

 

1. The Finance Act, 2022 inserted a new section 239A in the Income-tax Act,1961 (the Act) which provides that where under an agreement or other arrangement, in writing, tax deductible under section 195 on any income (other than TDS on interest income ) is borne by the payer (i.e. grossed up) and payer claims that tax is not deductible, such payer, having paid such tax ,can make an application before the Assessing officer for refund of tax so paid.
2. As per section 239A, such application is required to be filed within 30 days from the date of payment of such tax in the prescribed form and manner.3. The Central Board of Direct Taxes (CBDT) has inserted a new Rule 40G in the Income-tax Rules, 1962 (Rule) which provides that a claim for refund under section 239A of the Act shall be made in Form No. 29D.

 

4. The application in Form 29D shall be accompanied by copy of an agreement or other arrangement referred to in section 239A.
5. Prior to amendment in Finance Act, 2022 , section 248 of the Act allowed the assessee to file appeal before CIT(A) for refund of tax paid by him, where no such tax is deductible.6. Amendment is beneficial to the assessee as they can approach AO as the first authority and if AO do not accept the claim, they can prefer appeal before CIT(A).

 

 

The copy of the notification is as under:

 

Rule 40G & Form No. 29D: Application before AO for refund of TDS paid (Grossed up) where it was not deductible u/s 195 (other than Interest)