Tds

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Hita Desai (Querist)
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25 June 2013 Hello,

One of my client has taken technical service from foreign co(European). Payment is made directly to the co and service will be provided in India by the employee of the company. Questions are
1) At what rate TDS to be deducted?
2) What will be exchange rate while paying the TDS?
3) Is there any DTAA with Europe?

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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30 June 2013 25.75%

TT Buying rate of the date on which entry is booked or payment made, whicever is earlier.

Please check the country of residence of the foreign company.

Anuj
femaquery@gmail.com

Hita Desai

Hita Desai (Querist)
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01 July 2013 Hello Sir,

Thank you for the reply.

The company is in Italy. There is DTAA with the company. It mentioned the rate at 20% for Technical fees. so i will take the benefit of DTAA.

1)Do i need to take the closing exchange rate or the rate at the time of payment?

2) In which format i need to issue TDS certificate to the company, so that company can take credit in his country?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Great question! Here’s a detailed answer based on your situation with the Italian company:

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### 1) **TDS Rate Applicable:**

* Since the payment is for **technical services** made to a company in Italy (a country with which India has a DTAA),
* You should apply the **DTAA rate of 20%** on fees for technical services, instead of the default 25.75%.
* Make sure to obtain a **Tax Residency Certificate (TRC)** from the Italian company to claim DTAA benefits.

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### 2) **Exchange Rate to Use:**

* As per Indian TDS rules, the exchange rate to be applied is the **TT buying rate** of the **earlier of the following dates**:

* The date when the expense or liability is recorded in your books (accounting entry date), or
* The date on which the payment is actually made.
* So, if you booked the expense on 1st July and made the payment on 10th July, use the TT buying rate on 1st July.
* Use the exchange rate published by authorized dealers or RBI on that date.

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### 3) **Format of TDS Certificate:**

* You must issue **Form 16A** (TDS certificate for non-salary payments) to the foreign company.
* The certificate should mention:

* Amount paid in INR,
* Tax deducted in INR,
* Date of deduction and deposit,
* TAN and PAN of the deductor (your client),
* Tax rate applied (mentioning DTAA benefit),
* Details of DTAA (mention country and section, if possible).
* This certificate will help the foreign company claim credit for tax withheld in India while filing taxes in Italy.

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### Additional Points:

* Ensure that payment and TDS deduction are reported properly in **Form 27Q** (quarterly statement of TDS on payments to non-residents).
* Maintain documentation like invoices, TRC, and correspondence for audit purposes.
* It’s advisable to consult a tax professional for smooth processing and treaty benefits.

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If you want, I can help draft a sample Form 16A format or guide you to online tools for TDS certificate generation. Would you like that?

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