Remittance to non resident

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 October 2015 Dear experts,
We are going to remittance the 1500 USD, to non resident, however no DTAA and Service provider has not india's PAN NO. The service nature is commission, plz let me know how much TDS we need to deduct on this said transaction....

Regard
Rahul Goyal

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

26 October 2015 If the commission is payable for services rendered out side India no TDS applicable.

Querist : Anonymous

Querist : Anonymous (Querist)

26 October 2015 Sir service was rendered in india hence TDS is to be attract, plz clarify how much percente TDS is to be made if no DTAA and no pan no. Of service provider in india...

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

21 July 2025 Great question!

Here’s how it works:

1. Payment for Purchase of Machinery (No PE):
If the foreign company does NOT have a Permanent Establishment (PE) in India, payment for the purchase of machinery is a capital goods purchase.
No TDS is deductible on such payment under Income Tax Act because it is a purchase transaction, not a payment for services or royalties.
So, no tax liability or withholding on your client.
2. If Foreign Company Has a PE in India:
If the foreign company has a PE in India, and the payment relates to that PE (i.e., is connected to business carried on through the PE), then:
The income attributable to the PE is taxable in India as business income.
The payment could be treated as a remittance to the PE, and tax may be applicable.
However, TDS (withholding tax) would be required only if the payment is for services rendered or business profits repatriated.
For mere purchase of machinery (capital asset), no TDS is generally applicable even if the company has a PE, as it’s a capital expenditure, not income or fees.
3. Impact of DTAA:
DTAA provides relief on withholding tax rates mainly on income like royalties, fees for technical services, interest, dividends, etc.
Since purchase of machinery is not income, DTAA rates won’t apply to reduce or increase tax on purchase price.
Summary:
Scenario TDS Applicable? Rate/Remarks
Foreign co. with no PE in India, purchase of machinery No No TDS on purchase of goods
Foreign co. with PE in India, payment connected to PE Possibly Yes Only if payment is for services or repatriation of profits; not on purchase of machinery

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now