Circular No. 707

957. Whether, where non-residents are deputed to work in India and taxes are borne by employers, in certain cases if an employee to whom refunds are due has already left India and has no bank account here by the time assessment orders are passed, refund can be issued to employer as tax has been borne by it

What this is

Circular No. 707 was issued by the Central Board of Direct Taxes on 11 July 1995. Its subject is 957. Whether, where non-residents are deputed to work in India and taxes are borne by employers, in certain cases if an employee to whom refunds are due has already left India and has no bank account here by the time assessment orders are passed, refund can be issued to employer as tax has been borne by it.

What it does

Provides two ways for an employer to get back tax it bore for a non-resident employee who has gone home. Where non-residents are deputed to work in India and the employer bears their taxes, a refund often becomes due after the employee has left India and no longer has a bank account here. The Board sees no objection to paying a refund that has already become due to the employer, provided the non-resident assessee gives an authorisation for it, the procedure in Circular No. 285 dated 21 October 1980 being followed. It adds that under section 163 a person from or through whom a non-resident receives income, directly or indirectly, can be treated as his agent, so the company may itself file the return, be assessed in its own name in respect of that income under section 161(1), and claim the refund.

Why it was issued

References were made to the Board about refunds due to departed non-resident employees whose tax the employer had borne and who had no account in India by the time the assessment was made.

Who it reaches

Employers bearing the Indian tax of expatriate employees
Non-resident employees who have left India with a refund outstanding
Assessing Officers issuing refunds in expatriate cases

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.161	s.304
s.163	s.306

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

957. Whether, where non-residents are deputed to work in India and taxes are borne by employers, in certain cases if an employee to whom refunds are due has already left India and has no bank account here by the time assessment orders are passed, refund can be issued to employer as tax has been borne by it
1. References have been received by the Board in cases where non-residents are deputed to work in India and the taxes are borne by the employers. In certain cases, an employee to whom refunds are due has already left India and has no bank account here by the time the assessment orders are passed. A question has been raised whether in such cases, the refund can be issued to the employer as the tax has been borne by it.
2. The Board has considered the matter and it is of the view that insofar as the payment of refund which has already become due in concerned, there may be no objection to giving the refund to the employer if the non-resident assessee duly gives an authorisation in this regard. In such cases, the procedure laid down in Circular No. 285, dated 21-10-1980 issued by the Central Board of Direct Taxes needs to be followed.
3. Under the provisions of section 163 of the Income-tax Act, 1961, inter alia, any person from or through whom the non-resident is in receipt of any income, whether directly or indirectly, can be regarded as an agent in relation to the non-resident. Accordingly, the company itself can file the return and can be assessed in its own name in respect of that income under section 161(1) of the Act, and claim the refund.
Circular: No. 707, dated 11-7-1995.

What to watch

For the first route the refund must already have become due, and the non-resident's own authorisation is essential; the employer cannot claim it merely because it bore the tax.
The procedure in Circular No. 285 has to be followed, so that circular must be read with this one.
Taking the second route means the employer is assessed as agent under section 161(1) in respect of that income, with the responsibilities that follow; it is not a mere collection convenience.
The circular addresses refunds, not the employer's liability to deduct in the first place.

Where you meet it

When a refund voucher for a departed expatriate cannot be encashed, and in the employer's application to have the refund issued in its own name.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 13/2014 — Circular No. 13/2014 [F.no.225/78/2014-ita.ii], Dated 28-7-2014 28 July 2014

← Circular No. 708 · Circular No. 706 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.