Rule 217: No higher TDS rate for non-residents without PAN who give prescribed details
Section 397(2)(b)(i) requires tax to be deducted at a higher rate when the deductee does not furnish a valid PAN. Rule 217 switches that higher rate off for a non-resident (not being a company) or a foreign company without PAN, for interest, royalty, fees for technical services, dividend and payments on transfer of any capital asset, if the deductee gives the deductor the details and documents in Rule 217(2). Rule 217(3) also switches it off where the non-resident is not required to apply for PAN under section 262 and the rules.
Official notified Income-tax Rules, 2026Need advice on Rule 217?
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Rule 217 - Conditions under section 397(2)(c) for non-application of deduction of tax at higher rate, in case of non- residents
(1) The provisions of section 397(2)(b)(i) shall not apply to a non-resident, not being a company, or a foreign company (the deductee), where such deductee does not have a Permanent Account Number, in respect of payments in the nature of interest, royalty, fees for technical services, dividend and payments on transfer of any capital asset, if the deductee furnishes the details and the documents specified in sub-rule (2) to the deductor.
(2) The details and documents referred to in sub-rule (1) shall be the following:— (a) name, e-mail id, contact number; (b) address in the country or specified territory outside India of which the deductee is a resident; (c) a certificate of his being resident in any country or specified territory outside India from the Government of that country or specified territory, if the law of that country or specified territory provides for issuance of such certificate; and (d) Tax Identification Number of the deductee in the country or specified territory of his residence and in case no such number is available, then a unique number on the basis of which the deductee is identified by the Government of that country or the specified territory of which he claims to be a resident.
(3) The provisions of section 397(2)(b)(i) shall also not apply in respect of payments made to a person being a non-resident, not being a company, or a foreign company, if such person is not required to apply for PAN in view of the provisions of section 262 and rules prescribed therein.
Rule breakdown
What the rule does
Section 397(2)(c)(ii) of the Act allows the higher-rate provision in section 397(2)(b)(i) to be switched off for a non-resident, not being a company, or a foreign company, for payments and conditions that are prescribed. Rule 217 is that prescription.
The relief is limited to payments in the nature of interest, royalty, fees for technical services, dividend and payments on transfer of any capital asset (Rule 217(1)).
Details the deductee must give — Rule 217(2)
(a) Name, e-mail id and contact number.
(b) Address in the country or specified territory outside India of which the deductee is a resident.
(c) A certificate of residence from the Government of that country or specified territory, if its law provides for such a certificate.
(d) The Tax Identification Number in the country or territory of residence. If there is no such number, a unique number by which the Government of that country or territory identifies the deductee.
No PAN required at all — Rule 217(3)
The higher rate also does not apply to payments to a non-resident (not being a company) or a foreign company who is not required to apply for PAN under section 262 and the rules made under it.
Rule 217(3) is not limited to the five payment types in Rule 217(1).
Key takeaways
Five payment types
Rule 217(1) covers interest, royalty, fees for technical services, dividend and payments on transfer of any capital asset.
Four details
Name and contact details, foreign address, tax residency certificate where available, and foreign TIN or unique number.
Separate PAN-exempt limb
Rule 217(3) covers non-residents not required to apply for PAN under section 262.
Practical checklist
- Collect all four Rule 217(2) items before deducting without the higher rate.
- Check that the payment falls in one of the five Rule 217(1) categories.
- Keep the documents on file with the payment records.
Avoid
- Do not apply Rule 217(1) to payment types it does not list.
- Do not accept a residence certificate from anyone other than the Government of the country or territory concerned.
FAQs
Does Rule 217 remove TDS altogether?
No. It only removes the higher rate under section 397(2)(b)(i). Tax is still deducted at the rate that otherwise applies.
What if the deductee's country does not issue residence certificates?
Rule 217(2)(c) asks for the certificate only if the law of that country or territory provides for issuing one.
What if there is no foreign Tax Identification Number?
Rule 217(2)(d) accepts a unique number by which the Government of the country or territory of residence identifies the deductee.
Does Rule 217(1) apply to every payment to a non-resident?
No. Rule 217(1) is limited to interest, royalty, fees for technical services, dividend and payments on transfer of any capital asset. Rule 217(3) is a separate limb for persons not required to apply for PAN.
Glossary
- Deductee
- The non-resident or foreign company receiving the payment, as described in Rule 217(1).
- Tax Identification Number
- The number allotted by the country or territory of residence; Rule 217(2)(d) accepts a unique identifying number where no TIN exists.
- Higher rate
- The rate in section 397(2)(b)(i) that applies when a valid PAN is not furnished.