26 February 2017
Corrected Text: I am working for a firm in Bangalore providing Information Technology Service. We deputed our staff to Srilanka to provide IT Service at clients location.. We are Income tax Assesses in India. Our clients deducted Income tax from our payment, paid to the Taxation Authorities in Srilanka and issued Certificates. As per India-Srilanka Double Taxation Avoidance Agreement .can we adjust that tax in our tax dues in India. We have shown the transactions, payments received and tax deducted in our accounts in INR (As per exchange rates noted in Bank's Credit Advise). All payments are in USD through Bank. In their Tax Deduction Certificates they had shown the tax payment made in Srilankan Rupee and noted the corresponding value in USD. Our adviser says as the tax deducted in Srilanka and paid to that Government we have to provide proof that the amount reached Indian Indian Tax Department.If we could not adjust that tax deduction in our tax dues we will be at a loss. We have shown the Income from that transaction and if we could not adjust the tax deduction for it how can we get back that money. Is there any specific clause for TDS in Srilanka-India Double Taxation Avoidance Agreement for Tax Deduction
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27 February 2017
The tax deducted in Sri lanka will not reach Indian tax dept. But relief can be claimed as per DTAA provisions, Article 24 of DTAA with Sri Lanka. Wrong advice given by your advicer. Claim the relief in the return. The TDS deducted in Sri Lanka can be reduced in the tax payable in India by claiming relief in the return.
27 February 2017
See the link for relief claiming procedure. https://www.pwc.in/assets/pdfs/news-alert-tax/2016/pwc_news_alert_30_june_2016_cbdt_notifies_ftc_rules_allowing_resident_taxpayers_to_claim_credit_for_taxes_paid_overseas.pdf
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