Outward remittance
This query is : Resolved
Manan Shah
(Querist)
17 October 2011
Dear All,
Whether all foreign payment (outward remittance) are covered in the perview of Section 195?
Whether TDS is deducted for payment made towards the purchase of Materials ???
Kindly provide the clarity regarding the applicability of Section 195...
thnxs
Whether all foreign payment (outward remittance) are covered in the perview of Section 195?
Whether TDS is deducted for payment made towards the purchase of Materials ???
Kindly provide the clarity regarding the applicability of Section 195...
thnxs
17 October 2011
Hi,
Section 195 is a very wide section and TDS would be applicable only if the income is chargeable to tax in India (either directly under Sec 5 or under deeming provisions of Section 9). Thus the steps to be followed will be :
Step 1: Make the classification of transaction (eg u/s 9(1)(i) resp. dealing with Business transaction
in general etc)
Step 2: Check the taxability under Income Tax Act
Step 3: If Above is in affirmative, Check as per treaty entitlement and DTAA (if
any), taxability under DTAA (ie with regard to PE etc).
In my view, if the exporter payee has no business connection or PE (per DTAA) in India, then there would be no TDS applicable on the import of materials.
Section 195 is a very wide section and TDS would be applicable only if the income is chargeable to tax in India (either directly under Sec 5 or under deeming provisions of Section 9). Thus the steps to be followed will be :
Step 1: Make the classification of transaction (eg u/s 9(1)(i) resp. dealing with Business transaction
in general etc)
Step 2: Check the taxability under Income Tax Act
Step 3: If Above is in affirmative, Check as per treaty entitlement and DTAA (if
any), taxability under DTAA (ie with regard to PE etc).
In my view, if the exporter payee has no business connection or PE (per DTAA) in India, then there would be no TDS applicable on the import of materials.
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