Tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 October 2013 whether TDS is deductible on import charges consisting of ocean freight/Air freight DO charges, THC etc. paid to non resident considering provision of section 172 and and section 195....

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

29 October 2013 Refer to Circular No 723 dated 19 September 1995.

Tax deduction at source from payment made to foreign shipping companies

1. Representations have been received regarding the scope of sections 172, 194C and 195 of the Income-tax Act, 1961, in connection with tax deduction at source from payments made to the foreign shipping companies or their agents.

2. Section 172 deals with shipping business of non-residents. Section 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that these provisions have to be applied to every journey a ship, belonging to or chartered by a non-resident, undertakes from any port in India. Section 172 is a self-contained code for the levy and recovery of the tax, ship-wise, and journeywise, and requires the filing of the return within a maximum time of thirty days from the date of departure of the ship.

3. The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172.

4. Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies to payments made by a person referred to in clauses (a) to (j) of sub-section (1) to any “resident” (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any “resident”. On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections.

5. There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterers for carriage of passengers etc., shipped at a port in India. Since, the agent acts on behalf of the non-resident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of sections 194C and 195 will not apply.

Thus, only where the payee is covered under 172, TDS is not applicable. So you need to ensure that the Payee is covered therein. else you may have to apply TDS provisions.

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2013 Whether payee is covered u/s 172 at the time of import as they are goods are not shipped at any port in india but port outside india.
If tds is to be deducted ... at which rate?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

27 July 2025 Great question! Here's a detailed explanation for your scenario:

---

### Key Points:

1. **Section 172** of the Income Tax Act applies specifically to tax on income from shipping operations of **non-resident ships** carrying passengers, goods, livestock, or mail **shipped at a port in India**.

2. This means **Section 172 applies only if the shipment originates from an Indian port**.

3. If the goods are **imported** and shipped from a **port outside India**, Section 172 **does not apply** because the shipment didn't start from an Indian port.

4. In such cases, tax deduction at source (TDS) under **Section 195** (payments to non-residents) will apply on payments made to foreign entities for freight, DO charges, THC, etc.

5. If the payment is made to the **Indian agent** of the non-resident shipping company, **Section 194C** (contractor payments to residents) applies, and TDS needs to be deducted accordingly.

---

### So, to answer your specific question:

| Scenario | TDS Applicability | Relevant Section | Rate |
| ------------------------------------------------------------ | -------------------------------------------------------- | ---------------- | ----------------------------------------------------------------- |
| Goods shipped **from an Indian port** | No TDS under 194C/195 (Covered by Section 172) | Section 172 | Tax collected voyage-wise; no TDS deduction needed under 195/194C |
| Goods shipped **from a port outside India (Import)** | TDS applicable under Section 195 if paid to non-resident | Section 195 | Tax to be deducted as per DTAA or domestic law (generally 10-20%) |
| Payment made to **Indian agent of foreign shipping company** | TDS applicable under Section 194C | Section 194C | Usually 1-2% on contract payments |

---

### Additional notes:

* When Section 172 applies, the shipowner pays tax directly under that section, and no TDS deduction is required from your side.
* For imports where the shipment originates outside India, payments to foreign shipping companies are subject to TDS under Section 195.
* Always check the **DTAA** between India and the country of the shipping company to determine the exact tax rate.

---

If you want, I can help you find the exact DTAA rates or draft how to handle this in your accounting entries. Let me know!

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