Discussion > Accounts > AS >

# Royalty paid to non resident

Pages : 1

Audit & Taxation manager

[ Scorecard : 63]
Posted On 20 June 2012 at 21:58

A partnership firm  has entered an agreemrnt with foreign company by which it has to pay royalty for each quarterly sales as 2% of  Indian sales. Assume quarterly sales for march to be 50,00,000. Suppose on 24th march provision made in books for royalty payable & royalty actually paid on 4th April. Now on 24th march, dollar rate was 50 & on 4th april dollar rate was 51.

q1)  If liability has to be booked as % of indian sales, then  I think change of dollar rate should have no effect on booked liability. What is your opinion?

q2)  If If suppose I calculated the dollar on 24th march ((5000000*2%)/50=2000\$), now on 4th april, I paid (2000\$*51=102000), whether Rs. 2000 has to be transferred to foreign exchange fluctuation?

q3) Is there any implication on 31st march of AS 11?

points:

Royalty has to be paid as percentage of indian sales which has to be converted into dollars at time of payment.

What will be the difference if instead of partnership firm, it is company?

CA. Anuj Gupta
Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA

[ Scorecard : 5910]
Posted On 22 June 2012 at 11:50

 Originally posted by : DIVYA GOEL A partnership firm  has entered an agreemrnt with foreign company by which it has to pay royalty for each quarterly sales as 2% of  Indian sales. Assume quarterly sales for march to be 50,00,000. Suppose on 24th march provision made in books for royalty payable & royalty actually paid on 4th April. Now on 24th march, dollar rate was 50 & on 4th april dollar rate was 51. q1)  If liability has to be booked as % of indian sales, then  I think change of dollar rate should have no effect on booked liability. What is your opinion? The dollar rate has no effect in your case. q2)  If If suppose I calculated the dollar on 24th march ((5000000*2%)/50=2000\$), now on 4th april, I paid (2000\$*51=102000), whether Rs. 2000 has to be transferred to foreign exchange fluctuation? Yes. q3) Is there any implication on 31st march of AS 11? points: Royalty has to be paid as percentage of indian sales which has to be converted into dollars at time of payment.   What will be the difference if instead of partnership firm, it is company?

Zuzer Shabbir Singapury
Employee

[ Scorecard : 26]

1. Correct, no effect of dollar rate.

2. Transfer to Exchange gain/loss - Correct.

3. as-11 already complied if point 2 is followed.

Main concern should be regarding TDS, is there any DTAA .

There are 2 Replies to this message

## Post your reply for Royalty paid to non resident

Your are not logged in . Please login to post replies

Not a member yet ?? Click here to signup

### Message

• Use thank button to convey your appreciation.
• Maintain professionalism while posting and replying to topics.
• Try to add value with your each post.