matter of forign pmt

This query is : Resolved

Guest

Guest (Querist)

11 November 2010 sir plz tell me in which condition we will deduct tds on forign pmt.as per my think in case of purchase we wil not deduct tds.than sir in which condition we wil deduct tds on forign pmt. & what is the rate is it 2% or 1%.
regards
raj

taxindiaconnect

taxindiaconnect (Expert)
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11 November 2010
Section 195 of the Act casts an obligation on a resident tax payer making payment to a non resident in respect of an income taxable in India to withhold tax at the rates applicable. The tax is not required to be deducted from the payments made outside India to a NR if the income of NR is not taxable in India. The income of the NR is taxable in India if it satisfies certain conditions.

As per section 5 the income of NR should have been either be received or deemed to be received in India or should be accrue or deemed to accrue in India for such income to be taxable in India.

As per section 9 the income of a resident by way of fees for service rendered would be treated as technical fees and will be deemed to accrue and arise in India, the income will be taxable in India with in the meaning of deeming provision under section 9 of the Act as the explanation 2 to section 9 (1) (vii)

However As per section 90 of IT Act one can take the benefit of provision of Double taxation Avoidance Agreements ( DTAA) Currently India has DTAA’s with more then 75 Countries.

The tax deduction is required to be made under section 195 @ 10% if PAN is available. If no PAN available the tax rate would be 20%.

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