CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 22 April 2014

No Surcharge and Cess on TDS, in case of Non-Salaries

Finance Act (2) of 2009 comes with major amendment in TDS provisions, where it withdraws additional deductions of surcharge and cess for Non-Salaried, Resident Payments. This would give a slight relax to the deductors in calculating the rate of tax.

Applicable only on Non-Salaried, Resident Payments
The withdrawal of Surcharge and Cess is applicable only for Non Salaried payments, made to Indian Residents.

No Surcharge, But Cess on Salaried Payments
This amendment to Finance Act is not applicable for Salaried DS deductions, where the rate of tax will be determined by the rates in force and increased by Cess. Note that, in case of salaries, Surcharge is not applicable on Individuals from 2009-10 FY, so there is no question of surcharge applicability.

Surcharge Applicability on TDS
For the payments made under sections 193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 195, 196B, 196C and 196D, Surcharge should be calculated at the rate of two and half percent, in the case of every company other than a domestic company, in case the amount paid/payable during the financial year exceeds one crore. For other cases, no surcharge has to be made.

The same condition holds for Payments collected u/s 206C (TCS) from company, other than a domestic company and the amount collected/liable for collection in the financial year exceeds one crore.

Applicability of Cess
For the payments made under sections 193, 194, 194A, 194B, 194BB, 194C, 194D, 194E, 194EE, 194F, 194G, 194H, 194-I, 194J, 194LA, 195, 196B, 196C and 196D, Cess should be calculated at the rate of 3% on Tax plus surcharge, provided that, the amount is not being paid to is paid to a domestic company and any other person who is resident in India.

Rate of Surcharge:
The amended rate of surcharge is as under:

Payment made to Company, other than a domestic company
1. Amount paid/payable during the financial year exceeds one crore = 2.5%
2. Below one Crore = ZERO
Payment made to others = ZERO

Rate of Cess:
The amended rate of Cess, including Education cess and Secondary/Higher education cess are as under:

Payment to a domestic Company = ZERO
Payment made to other than companies, who is resident of India = ZERO
Others = 3%

Applicability of Amended provisions
The amended provisions would be applicable from October 01, 2009.

Cess is applicable on Non resident paymeents ..hence yu had short deducted...TDS.

1 Like

Suhas M (Executive Finance & Legal) (45 Points)
Replied 23 April 2014

Dear Saroj.

Thank you very much for the reply.

I would like to draw your attention to the definition of tax under DTAA between India & France which is as below;

DTAA – India and France

CONVENTION BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL

The Government of the Republic of India and Government of the French Republic, desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital;

Have agreed as follows :

ARTICLE 1 - Personal scope - This Convention shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2 - Taxes covered - 1. The taxes to which this Convention shall apply are :

(a) in India :

(i) the income-tax including any surcharge thereon ;

(ii) the surtax ; and

(iii) the wealth-tax,

(hereinafter referred to as ‘Indian tax’) ;

“ARTICLE 12 : Royalties and fees for technical services - 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

1[2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and, according to the laws of that State, but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services.]”

The DTAA clearly includes all tax including any surcharge and cess thereon and therefore there is need to add the same if paid as per DTAA.

And also as per Sec 90(2) of Income-Tax Act, The provisions of Double Taxation Avoidance Agreement prevail over the provision of the Income Tax in the above mentioned cases.

As per the above grounds we have deducted Tax @ 10%.

Kindly suggest your on on the same.

Thanks in advance.

Regards,

Suhas.M

Suhas M (Executive Finance & Legal) (45 Points)
Replied 28 April 2014

Dear All,

Kindly request you to share your valuable openions regarding the same.

Thanks & Regards,

Suhas.M

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 29 April 2014

DIC Asia Pacific Pte Ltd vs. ADIT (ITAT Kolkata)

The assessee, a Singapore company, offered interest and royalty income to tax at the rate of 15% & 10% as specified in Articles 11 & 12of the India-Singapore DTAA respectively. The AO held that the assessee was also liable to pay surcharge and education cess in addition to the tax. The CIT (A) upheld the assessee’s claim that surcharge was not leviable though he rejected the claim with regard to cess. On further appeal by the assessee, HELD allowing the appeal:

Articles 11 & 12 of the DTAA provide that the “tax” chargeable in India on interest and royalties cannot exceed 15% and 10% respectively. The expression ‘tax’ is defined in Article 2(1) to include ‘income tax’ and includes ‘surcharge’ thereon. Article 2(2) extends the scope of the ‘tax’ by laying down that it shall also cover “any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1”. “Cess” was introduced by the Finance Act, 2004 and it is described in s. 2(11) of the Finance Act 2004 as “additional surcharge for purposes of the Union, to be called the “Education Cess on income-tax”. Accordingly, the “education cess” is in the nature of an “additional surcharge” and is covered by Article 2. Accordingly, education cess cannot be levied in respect of the assessee’s tax liability.

1 Like

Suhas M (Executive Finance & Legal) (45 Points)
Replied 03 May 2014

Dear Saroj,

Thank you verry much for your reply.

Even after such a clear judgment I am wondering why we are asked to Pay Cess on DTAA rates by the Income Tax Department.

Thank you very much.

Regards,

Suhas.M

CA Kumar Ajay (Following My Dreams) (228 Points)
Replied 07 May 2014

TDS CPC Has Gone Mad.

These Notice Will Be Nullified.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 07 May 2014

Saroj/Suhas

I have a query on the matter at hand. Your foreign service provider is having a PAN in India. Do they have an address or an Office in India. I am not referring to a PE here. will they pay the balance 20% tax to Indian Govt ? Will they file a ITR in India. ? Because Dept will clearly notice that they are having income liable to be taxed @ 30% from 26Q/27Q.

Have you filed 26Q or 27Q. You may discuss about these to my email ID dipmaj @ rediffmail.com

Regards,

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 10 May 2014

Friends,

I am looking forward to your kind responses.

Regards,

Suhas M (Executive Finance & Legal) (45 Points)
Replied 20 May 2014

Originally posted by : Dipjyoti Majumdar
	Friends, I am looking forward to your kind responses. Regards,

Dear Friends & Experts,

Please provide us a brief idea about filing of IT Return by a Foreign company (without PE in India) having PAN No & TAX has been deducted by indian customers as per DTAA with regard to their income received within India.

Kindly help us with your openions regarding to the Final Tax rate & Tax computation for filing IT return for Income earned in india.

Thanks in advance,

Suhas.M