07 August 2011
There is not a single rate U/s 195. For each kind of income payable to a non-resident, there is a separate rate. Further rates are different for Non-Resident Non-Corporates and Non-Domestic companies.
For AY 2011-12 No surcharge is applicable to Non-corporate payees. However for non domestic companies surcharge is @2.5%. EC and SHEC will also be applied.
07 August 2011
The TDS rate depends on various sections. Now which section is applicable to you for the purpose of 195. If it is Interest then 194A if it is contract then 194C and so on. The rates as applicable to the Indian Section is the rate applicable for 195. Only after TDS you can remit the money and the same is the case of service tax if services are render in Indian then it is applicable
08 August 2011
Reference to Sec.195 specifies that Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of Income Tax Act (not being income chargeable under the head “Salaries” ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. The rates in force as such would apply according to the nature of payment as well as the category of payee with further consideration of DTAA, etc. TAXATION OF FOREIGN COMPANIES Since post assessment collection of taxes is difficult from a non-resident assessee by virtue of his residence and business activities being outside India, TDS is an imperative mode of tax collection. In such cases the rate of TDS also equates the tax rate. The estimated income approach in Section 44B to 44BBB relating to taxation of certain categories of income in case of foreign companies is lined with TDS as a mode of collection. Section 195 provides for deduction of tax at source as per rates in force which are specified in Annexure-1. Following are the sections dealing with presumptive rate of taxation in regard to income of foreign company. The tax payable is deducted at the time of remittance. Section Nature of Income % of gross receipt Chargeable as Tax and liable for TDS 115A Non-residents (Not a company) 20% and foreign company : Dividends/ Interest/income from units Foreign company : Royalty/fees for 30% Technical services. Note 1 : Lower rate provided in Double Taxation Avoidance agreement would prevail over these rates wherever they exist. Note 2 : The rate of 30% is reduced to 20% or 10% in respect of royalty or fees for technical services depending on whether the fees is received pursuant to an agreement made after 31.5.1997 but before 1.6.2005 or whether it is made on or after 1.6.2005. Now, a foreign company deriving royalty and fees for technical services have to bifurcate its royalties and fees into 3 parts as follows :- a) Royalty and fees received pursuant to an agreement made on or before 31.5.1997 and b) Royalty and fees received pursuant to an agreement made after 31.5.1997 but before 1.6.2005. c) Royalty and fees received pursuant to an agreement made on or after 1.6.2005. On the first part, tax would be payable @30%; on the second part, tax would be payable @ 20% and on the third part, tax would be payable @10%. Section /Nature of Income/ % of gross receipts 44B /Receipt from shipping business/ 7.5% 44BB/ Business of exploration of Mineral oils/ 10% 44BBA/ Business of operation of Air-craft/ 5% 44BBB/ Approved turn-key Power project/ 10% Further surcharge is also to be levied @2.5% and Education + HEC @3% thereon subject to the deduction exceeds Rs. one crore.