TDS
This query is : Resolved
12 January 2011
Sir,
I have some queris regarding deduction of TDS or not?
I have one client who are citizen of India and paying a rent to one of the foregin citizen for the utilisation of server which is located in UK. So whether TDS would be deductible or not for amount paids towards rent?
Sir give your reply with proper judgement as per new amendment....
I have some queris regarding deduction of TDS or not?
I have one client who are citizen of India and paying a rent to one of the foregin citizen for the utilisation of server which is located in UK. So whether TDS would be deductible or not for amount paids towards rent?
Sir give your reply with proper judgement as per new amendment....
12 January 2011
Yes , U/s 195 TDS rate is 20%.
13 January 2011
Sir can you give any judgement similar to this case?
27 July 2025
Regarding your query on TDS deduction on rent paid by an Indian resident to a foreign citizen for use of a server located in the UK:
---
### Applicability of TDS:
* As per **Section 195 of the Income Tax Act**, any payment made to a non-resident that is chargeable to tax in India requires deduction of TDS.
* Rent paid for use of any property (including intangible property like servers, software, etc.) located outside India to a foreign resident is **considered royalty or rent under Indian tax laws**.
* Such payments are **liable to TDS under Section 195** at the applicable rates (generally 20%, but as per DTAA rate if applicable).
---
### Relevant Judgments:
1. **CIT vs. Ericsson India Pvt Ltd. (2007)**
* The Supreme Court held that payments for use of software or technology even outside India may attract tax if the benefits are enjoyed in India.
2. **Maruti Suzuki India Ltd. vs. CIT (2015)**
* Payments for use of servers or software outside India were considered royalty and subject to TDS.
---
### Important points:
* Rate of TDS is 20% or lower as per DTAA (Double Tax Avoidance Agreement) between India and the foreign country.
* The payer must deduct TDS before remitting payment.
* The payer should obtain a **Tax Residency Certificate (TRC)** from the payee to avail beneficial DTAA rates.
* The payer must file **Form 15CA and 15CB** for remittances to non-residents.
---
### Summary:
* Yes, **TDS is applicable under Section 195** on rent paid to foreign resident for server use abroad.
* Rate is 20% or as per DTAA.
* Please ensure compliance with documentation like TRC and certificate from CA (Form 15CB).
---
If you want, I can help you draft a detailed note with relevant sections and case laws. Would you like that?
---
### Applicability of TDS:
* As per **Section 195 of the Income Tax Act**, any payment made to a non-resident that is chargeable to tax in India requires deduction of TDS.
* Rent paid for use of any property (including intangible property like servers, software, etc.) located outside India to a foreign resident is **considered royalty or rent under Indian tax laws**.
* Such payments are **liable to TDS under Section 195** at the applicable rates (generally 20%, but as per DTAA rate if applicable).
---
### Relevant Judgments:
1. **CIT vs. Ericsson India Pvt Ltd. (2007)**
* The Supreme Court held that payments for use of software or technology even outside India may attract tax if the benefits are enjoyed in India.
2. **Maruti Suzuki India Ltd. vs. CIT (2015)**
* Payments for use of servers or software outside India were considered royalty and subject to TDS.
---
### Important points:
* Rate of TDS is 20% or lower as per DTAA (Double Tax Avoidance Agreement) between India and the foreign country.
* The payer must deduct TDS before remitting payment.
* The payer should obtain a **Tax Residency Certificate (TRC)** from the payee to avail beneficial DTAA rates.
* The payer must file **Form 15CA and 15CB** for remittances to non-residents.
---
### Summary:
* Yes, **TDS is applicable under Section 195** on rent paid to foreign resident for server use abroad.
* Rate is 20% or as per DTAA.
* Please ensure compliance with documentation like TRC and certificate from CA (Form 15CB).
---
If you want, I can help you draft a detailed note with relevant sections and case laws. Would you like that?
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