Applicability of withholding tax on buyers credit

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Avinav Sapra (Querist)

26 November 2012 A Indian Bank “A” arrange buyers credit for a Indian company “B” through its overseas branch. My question as follows: Whether withholding tax is applicable on interest payment by “B” to overseas branch of Indian Bank on maturity of buyers credit?

2. A Indian Bank “A” arranges buyers credit for a Indian company “B” through overseas branch of a foreign bank My question as follows: Whether withholding tax is applicable on interest payment by “B” to overseas branch of foreign Bank on maturity of buyers credit?

Chintan Shah

Chintan Shah (Expert)

26 November 2012 Please note that overseas branch of Indian Bank will be treated as resident of India as per Section 6 of the Income tax Act and therefore, one needs to examine the withholding implications from domestic tax perspective rather than international tax perspective.

As per section 194, no tax is required to be deducted at source in respect of payment to banking company and therefore, there will be no TDS liability which making payment of interest to overseas branch of Indian Bank.

Avinav Sapra

Avinav Sapra (Querist)

26 November 2012 Sir,
i believe payment to the foreign bank will be covered under section 195 as it is payment to a non resident bank. hence the question of withholding tax.

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