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TDS for payments made to foreign company without PE in India and no PAN number

23 November 2016

Hello all

My company purchased a software license from a company based in Ireland and uses the software in India. We received a letter from the Ireland company that they don't have a Permanent Establishment in India and hence, we should not deduct any tax at source.

However, on various discussions I came across about the tax laws, they suggest different rates for deducting TDS for such cases like 10.5% in they have PAN in India and 20% if they don't have PAN. But these discussions were from 3-4 years ago.

As per latest guidelines, Could somebody please let me know if I have to deduct TDS or not? If yes, at what rate? Would be grateful if you could tell me the reference so that I can state it to the company in Ireland

Thanks in advance

Best Regards,

Vamsi

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1 Replies

Nihar Ranjan Rout (CA Final & CS Final) (577 Points)
Replied 26 November 2016

Hello, first thing you have to note is that since the nature is of software licence so TDS had to be done under 195. Second, you have to get 15cb from a CA and subsequently you will have to issue 15CA part C.

Now coming to the no pe, that will just help the company to avoid tax at the normal business rates. But technical services are an exception and TDS has to be done. Moreover, you will have to get TRC and form 10F from the company as well, and then approach a CA.