Tds
This query is : Resolved
21 October 2013
Sir, please guide me whether TDS is to be deducted on import freight charges (including ocean or air freight, THC , Do charges etc.) if paid to :
1.Non resident
2.indian agent of non resident
3.resident
Please give answer considering provision of section 172 and TDS provisions.........
1.Non resident
2.indian agent of non resident
3.resident
Please give answer considering provision of section 172 and TDS provisions.........
21 October 2013
AS PER INCOME TAX ACT, IF THE INCOME CHARGABLE TO TAX UNDER THE ACT, THEN TDS IS REQUIRED TO BE DEDUCTED.
HENCE, IF YOUR EXPENDITURE IS FOR ANY ACTIVITY TAXABLE UNDER INDIAN INCOME TAX ACT, THEN YOU ARE REQUIRED TO DEDUCT TAX AT SOURCE.
IF THERE IS ANY FURTHER QUERY THEN FEEL FREE TO ASK
HENCE, IF YOUR EXPENDITURE IS FOR ANY ACTIVITY TAXABLE UNDER INDIAN INCOME TAX ACT, THEN YOU ARE REQUIRED TO DEDUCT TAX AT SOURCE.
IF THERE IS ANY FURTHER QUERY THEN FEEL FREE TO ASK
22 October 2013
Sir, please guide me whether TDS is to be deducted on import freight charges (including ocean or air freight, THC , Do charges etc.) if paid to : 1.Non resident 2.indian agent of non resident 3.resident Please give answer considering provision of section 172 and TDS provisions.
22 October 2013
Sir, please guide me whether TDS is to be deducted on import freight charges (including ocean or air freight, THC , Do charges etc.) if paid to :
1.Non resident
2.indian agent of non resident
3.resident
Please give answer considering provision of section 172 and TDS provisions.
1.Non resident
2.indian agent of non resident
3.resident
Please give answer considering provision of section 172 and TDS provisions.
27 July 2025
This is a common and important question regarding TDS on import freight charges and how Section 172 of the Indian Contract Act interacts with Income Tax provisions.
Let me break down the applicability of TDS on import freight charges (including ocean freight, air freight, THC, DO charges, etc.) paid to:
---
### 1. **Payment to Non-Resident (Foreign Freight Carrier or Foreign Shipping Line)**
* **TDS is required under Section 195 of the Income Tax Act**, which mandates deduction of tax on payments made to non-residents.
* The income paid to non-resident for freight charges is **taxable in India** as it relates to the import of goods into India.
* The payer is required to deduct TDS at the applicable rates (usually as per Income Tax rules or as per DTAA if applicable).
* **Section 172 (Indian Contract Act) does NOT override TDS provisions under Income Tax Act.** It deals with agency liability but does not exempt TDS deduction from payments to non-residents.
---
### 2. **Payment to Indian Agent of Non-Resident**
* The Indian agent is considered as a separate resident entity.
* If the payment includes **commission or fees for agency services**, then **TDS under Section 194H (Commission or Brokerage)** is applicable on the commission portion.
* If the payment is purely **reimbursement of freight charges paid by the agent to the non-resident principal** (pure agent concept), **then TDS should not be deducted on the reimbursement amount** because agent is just passing the cost.
* However, in practice, it is necessary to **segregate the commission from reimbursement** clearly and maintain proper documentation.
* Again, **Section 172 (Agency law) means the agent acts on behalf of the principal**, but for TDS purpose, payments to agent (resident) are subject to TDS on income (commission), not on reimbursements.
---
### 3. **Payment to Resident (Indian Freight Carrier/Shipping Line)**
* TDS is deductible under **Section 194C (Contractor payment)** or Section 194J (Professional fees), depending on nature of payment.
* Freight charges paid to resident Indian carriers are **liable for TDS deduction** as per applicable section.
* No exemption from TDS applies based on Section 172 here because payment is made directly to resident entity providing service.
---
### Summary Table
| Payee | TDS Applicability | Relevant Sections | Section 172 Effect |
| ------------------------------------------------ | --------------------------------- | ------------------------------------ | ---------------------------------- |
| Non-resident foreign shipping line | Yes, deduct TDS under Section 195 | Section 195 | Does NOT exempt TDS deduction |
| Indian agent of non-resident (commission) | Yes, on commission income | Section 194H | Agent liable for commission income |
| Indian agent (reimbursement only) | No TDS on reimbursement | Not applicable on pure reimbursement | Agent passes cost; no TDS |
| Resident Indian shipping line or freight carrier | Yes, deduct TDS (194C/194J) | Sections 194C or 194J | No effect |
---
### Additional Points:
* **Section 172 cannot override Income Tax provisions** related to TDS.
* You must carefully maintain documentation to show that amounts paid to Indian agents are reimbursements (pure agent) versus commission.
* In case of non-resident payment, always check if DTAA provides any relief or reduced rates for TDS.
---
If you want, I can help draft a formal note or explanation with references to relevant Income Tax rules and legal precedents. Would that be helpful?
Let me break down the applicability of TDS on import freight charges (including ocean freight, air freight, THC, DO charges, etc.) paid to:
---
### 1. **Payment to Non-Resident (Foreign Freight Carrier or Foreign Shipping Line)**
* **TDS is required under Section 195 of the Income Tax Act**, which mandates deduction of tax on payments made to non-residents.
* The income paid to non-resident for freight charges is **taxable in India** as it relates to the import of goods into India.
* The payer is required to deduct TDS at the applicable rates (usually as per Income Tax rules or as per DTAA if applicable).
* **Section 172 (Indian Contract Act) does NOT override TDS provisions under Income Tax Act.** It deals with agency liability but does not exempt TDS deduction from payments to non-residents.
---
### 2. **Payment to Indian Agent of Non-Resident**
* The Indian agent is considered as a separate resident entity.
* If the payment includes **commission or fees for agency services**, then **TDS under Section 194H (Commission or Brokerage)** is applicable on the commission portion.
* If the payment is purely **reimbursement of freight charges paid by the agent to the non-resident principal** (pure agent concept), **then TDS should not be deducted on the reimbursement amount** because agent is just passing the cost.
* However, in practice, it is necessary to **segregate the commission from reimbursement** clearly and maintain proper documentation.
* Again, **Section 172 (Agency law) means the agent acts on behalf of the principal**, but for TDS purpose, payments to agent (resident) are subject to TDS on income (commission), not on reimbursements.
---
### 3. **Payment to Resident (Indian Freight Carrier/Shipping Line)**
* TDS is deductible under **Section 194C (Contractor payment)** or Section 194J (Professional fees), depending on nature of payment.
* Freight charges paid to resident Indian carriers are **liable for TDS deduction** as per applicable section.
* No exemption from TDS applies based on Section 172 here because payment is made directly to resident entity providing service.
---
### Summary Table
| Payee | TDS Applicability | Relevant Sections | Section 172 Effect |
| ------------------------------------------------ | --------------------------------- | ------------------------------------ | ---------------------------------- |
| Non-resident foreign shipping line | Yes, deduct TDS under Section 195 | Section 195 | Does NOT exempt TDS deduction |
| Indian agent of non-resident (commission) | Yes, on commission income | Section 194H | Agent liable for commission income |
| Indian agent (reimbursement only) | No TDS on reimbursement | Not applicable on pure reimbursement | Agent passes cost; no TDS |
| Resident Indian shipping line or freight carrier | Yes, deduct TDS (194C/194J) | Sections 194C or 194J | No effect |
---
### Additional Points:
* **Section 172 cannot override Income Tax provisions** related to TDS.
* You must carefully maintain documentation to show that amounts paid to Indian agents are reimbursements (pure agent) versus commission.
* In case of non-resident payment, always check if DTAA provides any relief or reduced rates for TDS.
---
If you want, I can help draft a formal note or explanation with references to relevant Income Tax rules and legal precedents. Would that be helpful?
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