Section -206AA: Non-obstante provision – “Notwithstanding anything contained in any other provisions of this act …” Obligation to furnish PAN on any person receiving any sum or income or amount on which tax is deductible. In absence of PAN, tax shall be deducted at the higher of the following rates:
-Though higher tax is Tentative, Refund of higher tax deducted available.
-Section applicable also when PAN incorrect or invalid.
-Certificate u/s. 197 will not be issued without PAN.
-From 1st June 2016, S. 206AA(7) introduced PAN not required for payment of:
Conditions applicable: only if non-resident provides specified information and documents (Rule 37BC(2)).
Documents as per Rule 37BC include –
-TRC is however required to claim DTA relief as Secs 90 & 90A not similarly amended! If a country does not have a system of providing TRC, there will be difficulties to claim DTA relief, but relaxation from S. 206AA will be available
Q. 1: Applicable where no tax payable?
No, as provision applicable only on sum or income or amount on which tax is deductible Under section 195, tax is deductible only if income is chargeable to tax. S. 206AA not applicable even in cases where income not taxable under DTAA if TRC available.
Q. 2: If DTAA rate (cap) is lower than rate as per Sec. 206AA?
Treaty provisions override both charging and machinery provisions of Section 206AA Irrespective of the non-obstante clause contained in Section 206AA View upheld by Special Bench of Hyderabad Tribunal in Nagarjuna Fertilizers and Chemicals Limited  78 taxmann.com 264 and other decisions.
Alternate view: DTA strictly does not apply to TDS provisions. DTA applies only to final taxes. TDS is only provisional. Domestic law can permit a higher TDS and then a refund later.
Q. 3: Will the non-resident claim credit of higher rate than DTA rate in home country?
The non-resident may not get credit in his home country as TDS may be higher than the DTA rate. NR would have to file a return in India and claim refund.
Q. 4: Is grossing up required if tax has to be borne by the payer?
No grossing up required as u/s. 195-A grossing up is for tax deducted at “rates in force” and not Sec. 206AA rate. Bosch (28 Taxmann.com 228 – Bangalore ITAT)
For example, Rate u/s. 115A from AY 2016-17 is 10%. S. 206AA rate of 20% applies. No grossing up required as per Bosch case.
Q. 5: Is education cess or surcharge applicable over and above S-206AA rate?
No surcharge or education cess if 20% tax rate u/s. 206AA applicable. S- 2 of Finance Act covers applicability of Surcharge & Education cess – S. 206AA is not covered therein.
Support found from: Para 4.8 of Circular No. 01 of 2017 dated 2nd January 2017.
Honorable Delhi Tribunal in Computer Sciences Corporation India (P.) Ltd.  77 taxmann.com 306 (Delhi – Trib.)