Section 195
This query is : Resolved
24 December 2020
If a company is making Demurrage payment to a company based in Singapore, will it have to deduct TDS?
Secondly, if a company is making professional services payment to Singapore international arbitration centre, will it have to deduct TDS?
Secondly, if a company is making professional services payment to Singapore international arbitration centre, will it have to deduct TDS?
24 December 2020
TDS not applicable as demurrage charge incurred outside India.
No TDS applicable on international arbitration center.
No TDS applicable on international arbitration center.
26 December 2020
This article states that TDS is applicable. Therefore the ambiguity:
https://taxguru.in/income-tax/applicability-tds-government-company-international-arbitration.html
https://taxguru.in/income-tax/applicability-tds-government-company-international-arbitration.html
26 December 2020
Exception rules not applicable for TDS.
29 December 2020
Can you please explain?
As per Section 195:
TDS shall be deducted at DTAA rates or rates in force whichever is lower on any payment made to Non resident or foreign company.
Then why are you saying TDS is not applicable.?
As per Section 195:
TDS shall be deducted at DTAA rates or rates in force whichever is lower on any payment made to Non resident or foreign company.
Then why are you saying TDS is not applicable.?
23 July 2025
You're absolutely right that Section 195 of the Income Tax Act, 1961 mandates the deduction of TDS on any payments made to non-residents or foreign companies. Let's break down the situation you mentioned, and I'll clarify the reasoning behind my earlier response.
1. Demurrage Payment to a Singapore-based Company:
Demurrage generally refers to a fee for the delay in returning equipment (like shipping containers) beyond the specified time.
Since demurrage is typically related to international shipping or transport services, the payment would likely fall under the category of business income of the Singapore-based company.
Under Section 195, TDS is applicable when the payment is made to a non-resident entity and the income is taxable in India.
However, demurrage charges are generally considered not taxable in India because they arise from shipping or transport services, which usually don’t have a permanent establishment (PE) in India. This means that there would be no TDS to deduct if the payment is for services outside India (i.e., not rendered in India).
In short: TDS is not applicable on demurrage payments made to a Singapore-based company, as these payments are for services that are outside the scope of Indian taxation (provided there is no permanent establishment in India).
2. Professional Services Payment to Singapore International Arbitration Centre:
International Arbitration Centers typically provide services like arbitration, dispute resolution, and legal services. If these services are provided outside India, the payment made would generally be taxable only in the jurisdiction of the service provider (i.e., Singapore).
If professional services are provided by a non-resident company or entity, the payment to that entity is usually subject to TDS under Section 195. However, if there is a Double Taxation Avoidance Agreement (DTAA) between India and Singapore, you need to look at the relevant articles in the DTAA to determine if the payment is exempt from TDS or if it can be taxed at a reduced rate.
The DTAA between India and Singapore provides for reduced rates of TDS on payments for services, so the applicable TDS rate would depend on the nature of services and whether they fall under specific provisions of the DTAA.
If the professional services provided by the arbitration center are taxable under Indian tax laws (like the business income or fees for technical services), then TDS must be deducted, either at the reduced rate under the DTAA or at the rate specified in the Income Tax Act.
3. Why TDS May Still Apply:
Although I initially mentioned "no TDS applicable" in the context of demurrage, the actual applicability of TDS depends on the nature of the payment and the taxability in India.
If the Singapore International Arbitration Centre is providing services that are taxable under Indian laws (like professional services), TDS will apply under Section 195 at the applicable rate.
If the services are not taxable in India (i.e., no permanent establishment in India and the services are not effectively connected to India), then no TDS would be applicable.
4. Conclusion:
Demurrage Payment to Singapore-based Company: Likely no TDS because these charges typically relate to services rendered outside India, and there is no Indian PE involved.
Professional Services Payment to Singapore International Arbitration Centre: TDS applicable as it relates to professional services. The rate of TDS will depend on the DTAA provisions between India and Singapore, or the rate in force.
If you have any doubts or want to ensure compliance with the DTAA, you can also consult the tax treaty between India and Singapore for more precise guidance on the TDS rate for the specific nature of the services being rendered.
1. Demurrage Payment to a Singapore-based Company:
Demurrage generally refers to a fee for the delay in returning equipment (like shipping containers) beyond the specified time.
Since demurrage is typically related to international shipping or transport services, the payment would likely fall under the category of business income of the Singapore-based company.
Under Section 195, TDS is applicable when the payment is made to a non-resident entity and the income is taxable in India.
However, demurrage charges are generally considered not taxable in India because they arise from shipping or transport services, which usually don’t have a permanent establishment (PE) in India. This means that there would be no TDS to deduct if the payment is for services outside India (i.e., not rendered in India).
In short: TDS is not applicable on demurrage payments made to a Singapore-based company, as these payments are for services that are outside the scope of Indian taxation (provided there is no permanent establishment in India).
2. Professional Services Payment to Singapore International Arbitration Centre:
International Arbitration Centers typically provide services like arbitration, dispute resolution, and legal services. If these services are provided outside India, the payment made would generally be taxable only in the jurisdiction of the service provider (i.e., Singapore).
If professional services are provided by a non-resident company or entity, the payment to that entity is usually subject to TDS under Section 195. However, if there is a Double Taxation Avoidance Agreement (DTAA) between India and Singapore, you need to look at the relevant articles in the DTAA to determine if the payment is exempt from TDS or if it can be taxed at a reduced rate.
The DTAA between India and Singapore provides for reduced rates of TDS on payments for services, so the applicable TDS rate would depend on the nature of services and whether they fall under specific provisions of the DTAA.
If the professional services provided by the arbitration center are taxable under Indian tax laws (like the business income or fees for technical services), then TDS must be deducted, either at the reduced rate under the DTAA or at the rate specified in the Income Tax Act.
3. Why TDS May Still Apply:
Although I initially mentioned "no TDS applicable" in the context of demurrage, the actual applicability of TDS depends on the nature of the payment and the taxability in India.
If the Singapore International Arbitration Centre is providing services that are taxable under Indian laws (like professional services), TDS will apply under Section 195 at the applicable rate.
If the services are not taxable in India (i.e., no permanent establishment in India and the services are not effectively connected to India), then no TDS would be applicable.
4. Conclusion:
Demurrage Payment to Singapore-based Company: Likely no TDS because these charges typically relate to services rendered outside India, and there is no Indian PE involved.
Professional Services Payment to Singapore International Arbitration Centre: TDS applicable as it relates to professional services. The rate of TDS will depend on the DTAA provisions between India and Singapore, or the rate in force.
If you have any doubts or want to ensure compliance with the DTAA, you can also consult the tax treaty between India and Singapore for more precise guidance on the TDS rate for the specific nature of the services being rendered.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Regarding Appointment of auditor in case of casual vacancy
- GST- DRC 03 RCM Liability
- RCM on GTA Services
- Query on managerial remuneration u/s 197 of CA 2013
- Conversion of Proprietorship Firm to Partnership Firm
- Updated return filing
- GST 9- Table 8
- REVENUE RECOGNITION AS PER IND AS 115
- Validity of form 15 G and 15 H on Interest on fixed deposit
- Supply to unit situated in SEZ
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Composition Dealer GST Annual Return Filing process
- Revision under Section 264 in The Income Tax Act, 1961
- TDS under section 195.
- Filing GST Returns after death of proprietor
- Registered Required in GST Act
Trending Online Classes
CAclubindia
