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TDS on Payment to Non-Residents

09 March 2010

Dear All,

Please help me at the earliest for the following case:

"A Resident company pays annual subscripttion fees to a foreign Company situated at China.The fees is towards accessing the website of the Company for various information."So is TDS required to be deducted on the payment ,if yes ,what is the rate?

-Rupesh

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9 Replies

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 09 March 2010

Yes TDS is to be deducted...

And i think its the case of accessing services, so accordingly the rate should apply, but not sure... About TDS, that has to be deducted

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CA Priya (CS Final) (1049 Points)
Replied 09 March 2010

Hey rupesh..... I had similar query few days back....... whether TDS is applicable for membership subscripttion..... But no provision to deduct tax at source for this.... Sure yer......

1 Like

RUPESH CHOUDHURY (Student) (484 Points)
Replied 10 March 2010

Hi Ms. Priya,

Thanks a lot for going thru this..I think TDS is to be deducted u/s-195.Now I want to know the rate of deduction..and if deducted,then while filing the TDS return...what will be the PAN of the deductee??on what rate of exchange the tds is to be deducted and the rest amount to be paid to the party(remitting in USD),etc??

Divya K S (CA) (289 Points)
Replied 10 March 2010

As per the definition of royalty for purposes of Section 195, providing information is also included in the definition. So, TDS need to be deducted @ withholding tax rates as per Section 195 or rates as per DTAA, whichever is less (beneficial to the assessee) treating it as royalty income.

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RUPESH CHOUDHURY (Student) (484 Points)
Replied 12 March 2010

Dear Ms. Divya, Thank u very much for replying.can u please reply to my following query:

Originally posted by : RUPESH COUDHURY
	Hi Ms. Priya, Thanks a lot for going thru this..I think TDS is to be deducted u/s-195.Now I want to know the rate of deduction..and if deducted,then while filing the TDS return...what will be the PAN of the deductee??on what rate of exchange the tds is to be deducted and the rest amount to be paid to the party(remitting in USD),etc??

Rachit (Analyst) (913 Points)
Replied 12 March 2010

PAN of Non-Resident would be FFFCF999F TDS rate 10.3% (below Rs.1 crore payment) TDS would be deducted at the exchange rate prevalant on date of payment

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Divya K S (CA) (289 Points)
Replied 12 March 2010

As per DTAA between India & China, the rate of tax to be deducted at sources is 10% for royalty. As per rates prescribed u/s 195 of Income Tax Act, 1961, the rate is 10% for both company & non-company deductees.

Since, the rates are same, tax rate to be applied is 10%. Otherwise, rate whichever is less must be applied. In this case, 10% + education cess @ 3%, i.e., 10.3% must be used.

The PAN of the deductee must be quoted in the e-TDS returns by asking them only. If PAN is not quoted in ETDS returns, then tax must be deducted @ 20%.

On the date of certifying the payment in Form 15CB, the exchange rates can be used. This exchange rates can be used for both TDS deduction & remittance of balance amount.