Tds deduction

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Accounting Home Services (Querist)
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23 September 2013 SIR,

WE DEDUCT TDS UNDER SEC 195 PAYMENT OF OUT SIDE INDIA PARTY
I HAVE A LITTLE DOUBT ABOUT THAT WHAT IS BENEFIT OF DEDUCTEE

THANK IN ADVANCE

Nikhil Kaushik

Nikhil Kaushik (Expert)
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23 September 2013 Dear Girish,

There is no benefit to the deductee. It is a legal obligation to pay taxes.

However, if the deductee if of the view that on account of DTAA, he/she/it can claim lower of zero taxability, he/she/it can file a tax return to claim refund of the taxes deducted as TDS.

Accounting Home Services

Accounting Home Services (Querist)
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23 September 2013 SIR SUPPOSE WE SHOULD PAY RS. 10 LACK TO USA PARTY I WANT DEDUCT TDS 20% BECAUSE NOT HAVING PAN NO
TDS AMOUNT RS. 2 LACK
REMAINING BALANCE RS. 8 LACK
PARTY CAN'T ACCEPT THIS AMOUNT BECAUSE WE ALL READY FIXED AMOUNT OF ORDER/WORK 10 LACK
I WANT TO PAY PARTY 10LACK
WHAT SHOULD I DO AS A ACCOUNTANT & HOW TO MAKE ENTRY

Nikhil Kaushik

Nikhil Kaushik (Expert)
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23 September 2013 Girish,

You can ask the party to apply for PAN. If the the client believes that there is no taxability on its income earned in India, then apply for nil deduction certificate from tax department.

Alternatively, you may gross up and bear the tax expense on your own.

Rs 1000000*100/(100-20)= Rs 12,50,000

So you would Show total consideration as Rs 12,50,000. Pay tax as Rs 2,50,000.

The negative side of this: your service tax liability, if any, may increase.

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