payments to non residents
This query is : Resolved
26 October 2010
Dear all,
Ours is a pvt ltd co. We r in t process to acquire a pvt ltd co. in Italy. we have appointed a consultant in Italy. we have to pay $ 13000 to this consultant for the preparation of duedeligence report etc.
That consultant has no establishment in india. They dont have pan no.
What to do, we need to deduct tds on such payments?
Waiting for ur reply.
Regards,
Sushil.
Ours is a pvt ltd co. We r in t process to acquire a pvt ltd co. in Italy. we have appointed a consultant in Italy. we have to pay $ 13000 to this consultant for the preparation of duedeligence report etc.
That consultant has no establishment in india. They dont have pan no.
What to do, we need to deduct tds on such payments?
Waiting for ur reply.
Regards,
Sushil.
27 October 2010
PAN of consultant is not required, Tax is deposited by the payer in case of foreign exchange remmitance. You have to submitt CA certificate also in this regard.
taxindiaconnect
(Expert)
27 October 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.
Since in your query the country of residence of non resident company mentioned is Italy, 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%.
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.
Since in your query the country of residence of non resident company mentioned is Italy, 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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