TDS
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 July 2011
IF WE MADE A CONTRACT WITH A FOREIGN PERSON FOR ADVERTISING PAYMENT AND LIMIT FOR TDS IS CROSSED IN INDIAN RUPEES. PAYMENT DONE BY US IN FOREIGN RS. & SERVICES ARE PROVIDED BY THAT PERSON IN FOREIGN COUNTRY.
Q.1 . Wheather to foreign party it's indian income or not ?
Q. 2. Wheather responsibility to deduct tds in payment is or not ?
I required urgent answer > PLS help me
Q.1 . Wheather to foreign party it's indian income or not ?
Q. 2. Wheather responsibility to deduct tds in payment is or not ?
I required urgent answer > PLS help me
03 July 2011
ALL PAYMENTS ON NR ARE NOT TAXABLE IN INDIA
IF THE NR HAS A BUSINESS CONNECTION IN INDIA THEN TAXABILITY IS THERE
IF THE PAYMENT IS NOT TAXABLE THEN NO TAX IS TO BE DEDUCTED
CHECK WHETHER NR HAS A BUSINESS CONNECTION IN INDIA
CA MANOJ GUPTA
JODHPUR
09828510543
IF THE NR HAS A BUSINESS CONNECTION IN INDIA THEN TAXABILITY IS THERE
IF THE PAYMENT IS NOT TAXABLE THEN NO TAX IS TO BE DEDUCTED
CHECK WHETHER NR HAS A BUSINESS CONNECTION IN INDIA
CA MANOJ GUPTA
JODHPUR
09828510543
Querist : Anonymous
Querist :
Anonymous
(Querist)
04 July 2011
Thanks for reply .
But sir in the current case we have made just on time contract with foreign party (i.e. foreign advt. company) for advertisement of our products in foreign country in this how business connection concept was applied.
pls give reply
But sir in the current case we have made just on time contract with foreign party (i.e. foreign advt. company) for advertisement of our products in foreign country in this how business connection concept was applied.
pls give reply
27 July 2025
Got it! Here's a detailed explanation based on your situation:
---
### Situation Recap:
* You made a contract with a **foreign party** for advertisement.
* The advertisement services are **provided outside India** (in the foreign country).
* Payment is made in foreign currency.
* The TDS threshold in Indian Rupees is crossed.
* You want to know:
1. Whether this payment is taxable as Indian income?
2. Whether you are liable to deduct TDS on this payment?
---
### 1. **Is this income taxable in India?**
Under Indian Income Tax Law, **only income that is accrued or arisen in India or is deemed to accrue or arise in India** is taxable.
* Since the **services (advertisement) are provided outside India** by the foreign company, this income **does not accrue or arise in India**.
* Hence, the payment to the foreign party for services rendered **outside India** is generally **not taxable in India**.
* This means it is **not Indian income** for tax purposes.
---
### 2. **Is there an obligation to deduct TDS?**
Section 195 of the Income Tax Act mandates TDS deduction on any sum payable to a non-resident if the sum is chargeable to tax in India.
* Since the income is **not taxable in India** (services rendered abroad), **there is no requirement to deduct TDS**.
* This is because the payment is **not chargeable to tax** in India.
* However, **to be absolutely safe**, you may ask the foreign party for a **declaration or certificate** stating that the services were rendered outside India and that the income is not taxable here.
* This helps if the tax authorities query the transaction.
---
### **Business Connection Concept**
* Business connection generally means the foreign party has a **permanent establishment (PE)** or fixed place of business in India.
* In your case, if the foreign party **does not have any business connection or PE in India**, then their income is not taxable here.
* The contract for services provided wholly outside India **does not create a business connection in India**.
---
### **Summary**
| Question | Answer |
| ------------------------------------------------ | ------------------------------------------------------------- |
| Is this foreign party's income taxable in India? | No, because services provided outside India |
| Is TDS deductible on this payment? | No, since payment is not chargeable to tax in India |
| What about business connection? | No business connection exists if no PE or fixed base in India |
---
If you want, I can help you draft a formal declaration letter or explain further about PE/business connection. Would you like that?
---
### Situation Recap:
* You made a contract with a **foreign party** for advertisement.
* The advertisement services are **provided outside India** (in the foreign country).
* Payment is made in foreign currency.
* The TDS threshold in Indian Rupees is crossed.
* You want to know:
1. Whether this payment is taxable as Indian income?
2. Whether you are liable to deduct TDS on this payment?
---
### 1. **Is this income taxable in India?**
Under Indian Income Tax Law, **only income that is accrued or arisen in India or is deemed to accrue or arise in India** is taxable.
* Since the **services (advertisement) are provided outside India** by the foreign company, this income **does not accrue or arise in India**.
* Hence, the payment to the foreign party for services rendered **outside India** is generally **not taxable in India**.
* This means it is **not Indian income** for tax purposes.
---
### 2. **Is there an obligation to deduct TDS?**
Section 195 of the Income Tax Act mandates TDS deduction on any sum payable to a non-resident if the sum is chargeable to tax in India.
* Since the income is **not taxable in India** (services rendered abroad), **there is no requirement to deduct TDS**.
* This is because the payment is **not chargeable to tax** in India.
* However, **to be absolutely safe**, you may ask the foreign party for a **declaration or certificate** stating that the services were rendered outside India and that the income is not taxable here.
* This helps if the tax authorities query the transaction.
---
### **Business Connection Concept**
* Business connection generally means the foreign party has a **permanent establishment (PE)** or fixed place of business in India.
* In your case, if the foreign party **does not have any business connection or PE in India**, then their income is not taxable here.
* The contract for services provided wholly outside India **does not create a business connection in India**.
---
### **Summary**
| Question | Answer |
| ------------------------------------------------ | ------------------------------------------------------------- |
| Is this foreign party's income taxable in India? | No, because services provided outside India |
| Is TDS deductible on this payment? | No, since payment is not chargeable to tax in India |
| What about business connection? | No business connection exists if no PE or fixed base in India |
---
If you want, I can help you draft a formal declaration letter or explain further about PE/business connection. Would you like that?
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