22 August 2014
I want to know the treatment of withholding tax deduction from Income received from Foreign Client for services rendered abroad. What are the tax implications in India & how it is to be accounted for in the books of accounts?
23 August 2014
you need to compute the tax credit under section 90/91 (as might be applicable). the tax credit amount should be treated as an asset similar to advance tax. The difference between tax paid outside India and foreign tax credit should be written off to reserves/capital account
25 August 2014
Thanks for your reply. Further I want to know how to calculate the tax credit if the invoice for the service is raised in USD & withholding tax deducted by foriegn client is in USD. What exchange rate to be applied? Exchange rate on Date of deduction/realisation or date of booking invoice? Any documents to be collected from the foreign client as a proof of tax deduction?
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