TDS Applicability on credit card payments

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CA Devin (Querist)
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07 January 2009 query is regarding Deduction of tax at source on payments made through credit cards or direct debit through internet by the vendor.

1. Whether TDS can be deducted through issue of debit note to the party in case payment is made in INR.
2. If the payment is made in USD does TDS liabilty arise taking in to consideration the DTAA with USA & if what mode should be followed for deduction of tax at source.

K V Subba Rao

K V Subba Rao (Expert)
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07 January 2009 I havn't come across any study material to refer. But it appears to me that Exchequer doesn't bother about methodology adopted by you for affecting TDS.

So you may debit the Party's Account in your books with TDS amount and remit to the Govt. For this purpose, date or credit or payment to Party is the criterion to decide the Due date but not date on which you raise Debit Note and journalise it in your books of account.
It is upto you how you realise the amount from Party.

The above position applies whether you make payments in INR or USD

CA Devin

CA Devin (Querist)
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08 January 2009 Thank you very much sir, for your Prompt reply. But, as you know in online payments full payment has to be made and system doesn't accept less payments, in such situations is there any other way except raising debit notes??

K V Subba Rao

K V Subba Rao (Expert)
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09 January 2009 I appreciate difficulty.

You have to manage with your Vendors (Service Providers) to show TDS amount as deduction right in the Bill or route the documents thro banking channel for net amounts only so as enable you pay net amount to Vendor on line and comply with statutory TDS provisions

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