23 July 2011
Firstly I would like to clarify that TDS not always depends on having/not having a PAN.
However to decide upon the tds on commission please provide: 1. Detailed nature of services for which commission is to be paid. 2. Status of NR i.e., company, individual etc.,
24 July 2011
Where the non-resident agent operates outside the country, no part of his income arises in India. Further, if the payment remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments are therefore not taxable in India.
If you are paying an independent broker or GCA doing his own business and charging you commission for passing on his orders to you or bringing buyer / seller together and buyer / seller themselves contract on principal to principal basis, provided the agent has no PE in India and he performs his function abroad and receives from you money abroad, it is his business income abroad and not accruing tax in India. Most of the DTAAs reiterate this position in Article 7 and therefore no tax.
However, if agent is offering you Technical, managerial or consulatancy service or provides you personnel for the same, then TDS is applicable on FTS irrespective of whether the agent has a PE or not. Therefore it depends on what service the agent is giving you.
The income that is billed should be purely for commission on exports and there should be an agreement to back these invoices. If you pay for managerial services to the agent (normally this is the situation of dependent agents), then you have to deduct TDS on Professional (technical & managerial Services).
No tax is therefore deductible under section 195 and also the expenditure on export commission and other related charges payable to a non-resident for services rendered outside India becomes allowable expenditure.
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