Tds by a foreign entity
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
20 October 2014
An organisation based in UK is paying consultation fees to an individual resident in india for consultation on indian market and education in india. Are they liable to deduct TDS while paying the consulrant his fees in Indian rupees
20 October 2014
As per Circular No. 726, dated 18-10-1995, payments to lawyers, solicitors and chartered accountants are not liable to tax deduction by a foreign company if the said company does not have a Permanent Establishment in India, nor has an agent in India. Such an exception has not been provided in case of other payments, which implies that the same are subject to tax deduction.
It is noticed that these provisions are not followed in quite a few cases. As of now, the Tax Department is not viewing this very strictly. Nonetheless, this is technically a breach of the provisions of the law.
Under the above circumstances, is it fair to subject the foreign companies to TDS provisions ?
Can it be said that the provisions of Chapter XVII B go beyond the territorial limits of India and compliance is to be made by the payer who is neither assessable to tax, nor is the payer a resident of India ?
To make the law fair, either the existing Circular should be extended to other provision, or the law should be amended to provide that these Sections do not apply, unless the non-resident has a PE or and an agent in India.
It is noticed that these provisions are not followed in quite a few cases. As of now, the Tax Department is not viewing this very strictly. Nonetheless, this is technically a breach of the provisions of the law.
Under the above circumstances, is it fair to subject the foreign companies to TDS provisions ?
Can it be said that the provisions of Chapter XVII B go beyond the territorial limits of India and compliance is to be made by the payer who is neither assessable to tax, nor is the payer a resident of India ?
To make the law fair, either the existing Circular should be extended to other provision, or the law should be amended to provide that these Sections do not apply, unless the non-resident has a PE or and an agent in India.
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