We have to make payment to a non resident individual for training services provided outside India, I want to know is the payment is subject to TDS with below facts, if taxable relevant DTAA Article please.
1. Training service provided outside India by non resident
2. company doesn't have any branch outside India, all training service receipts are directly received in India, later the company is paying trainees located out side India
09 August 2024
For payments to a non-resident for training services provided outside India, the tax treatment will depend on several factors, including the nature of the service and the relevant provisions under the Income Tax Act and the applicable Double Taxation Avoidance Agreement (DTAA). Here's a detailed breakdown of the considerations:
### **Taxability of Payments to Non-Residents**
1. **Nature of the Service:** - **Training Services Provided Outside India:** Since the training services are provided outside India by a non-resident, it is crucial to determine if these services are subject to tax under Indian law.
2. **Relevant Provisions Under the Income Tax Act:** - **Section 9(1)(vii):** This section covers income that is deemed to accrue or arise in India. It includes fees for technical services or professional services. However, if the training service is provided outside India and is not rendered in India, it may not fall under this section. - **Section 195:** Requires TDS on any payment made to a non-resident that is taxable under the Income Tax Act.
3. **Double Taxation Avoidance Agreement (DTAA):** - **Relevant DTAA Article:** The DTAA between India and the country of the non-resident will guide whether the payment is subject to TDS and at what rate. Typically, the DTAA contains articles on "Income from Independent Personal Services" or "Fees for Technical Services."
### **Analysis Based on Provided Facts**
1. **Training Provided Outside India:** - Since the training services are provided outside India, and the non-resident does not have a permanent establishment in India, the income is generally not taxable in India under the domestic tax laws.
2. **Direct Receipts and Payments:** - The fact that the company receives payments directly in India does not affect the taxability of the service provider's income in India. The location of the service provider and the place where services are rendered is crucial.
3. **DTAA Considerations:** - **Check DTAA Provisions:** You will need to refer to the specific DTAA between India and the country of the non-resident. Most DTAA agreements provide that payments for professional services or training services are taxable only in the country of the service provider (in this case, the non-resident’s country) and not in India.
### **Practical Steps:**
1. **Verify DTAA Provisions:** - Look up the DTAA agreement between India and the country where the non-resident resides. Identify the article related to "Fees for Technical Services" or "Income from Independent Personal Services" to confirm whether the payment is subject to TDS in India.
2. **Documentation:** - Obtain and maintain documentation to support that the services were provided outside India and that the non-resident does not have a permanent establishment in India.
3. **Form 15CA/15CB:** - If the DTAA confirms that the payment is not taxable in India, you can still file Form 15CA/15CB to declare the remittance. Form 15CA is a declaration of remittance, and Form 15CB is a certificate from a Chartered Accountant verifying that tax compliance is met.
4. **Consult a Tax Professional:** - For accurate application of DTAA and tax compliance, consult a tax professional or Chartered Accountant who can provide guidance based on the specific DTAA provisions and the nature of the services.
### **Summary:**
- **TDS Applicability:** If the training services are provided outside India and the non-resident does not have a permanent establishment in India, TDS may not be applicable based on Indian domestic tax laws and the relevant DTAA provisions. - **DTAA Reference:** Check the specific DTAA for detailed provisions on taxation of such payments. - **Compliance:** File Form 15CA/15CB as a precautionary measure to declare the payment, even if TDS is not applicable.
By following these guidelines, you can ensure compliance with tax regulations and avoid any potential issues with the tax authorities.
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