Tds of foreign company
This query is : Resolved
01 September 2013
If an Indian Company takes services of an intermediary company registered and situated in USA to receive the payments from its USA based client because of currency conversion issue.
The intermediary will deduct its brokerage and remit the balance.
Then, will TDS be liable to be deducted on such brokerage charged by the intermediary.
If No, why?
If Yes, how much and under which section?
One thing more to mention that the intermediary does not hold PAN in India.
Please reply its very very urgent.
The intermediary will deduct its brokerage and remit the balance.
Then, will TDS be liable to be deducted on such brokerage charged by the intermediary.
If No, why?
If Yes, how much and under which section?
One thing more to mention that the intermediary does not hold PAN in India.
Please reply its very very urgent.
02 September 2013
Seems it shall be taxable in India.
If the foreign party has TRC then rate shall be 20% otherwise 25.75%
Anuj
femaquery@gmail.com
If the foreign party has TRC then rate shall be 20% otherwise 25.75%
Anuj
femaquery@gmail.com
Message likes :
1 times
02 September 2013
Loads of thank you sir for replying.
Sir, if the foreign intermediary does not have a PAN, then what will be the TDS rate and under which section?
Also, a 50% shareholding director in Indian Company is also a major stakeholder in the Intermediary company in USA. He is ordinary resident in the said F.Y.
Please reply
Sir, if the foreign intermediary does not have a PAN, then what will be the TDS rate and under which section?
Also, a 50% shareholding director in Indian Company is also a major stakeholder in the Intermediary company in USA. He is ordinary resident in the said F.Y.
Please reply
02 September 2013
Then the said transaction shall become international transaction and be subject to transfer pricing…..
Anuj
femaquery@gmail.com
Anuj
femaquery@gmail.com
Message likes :
1 times
02 September 2013
I completely agree with you Sir on this aspect.
But my issue at this point of time is whether to deduct TDS on the brokerage or not?
But my issue at this point of time is whether to deduct TDS on the brokerage or not?
27 July 2025
Here’s the breakdown of your TDS query on brokerage paid to a foreign intermediary (USA):
---
### 1. **Is TDS deductible on brokerage paid to foreign intermediary?**
* Yes, TDS is applicable on payments to a non-resident (foreign company) for services or commission/brokerage.
* Such payments are treated as **"fees for technical services" (FTS)** or **commission** under Indian Income Tax Act.
* TDS provisions apply under **Section 195** of the Income Tax Act for payments to non-residents.
---
### 2. **What is the applicable TDS rate?**
* **Without Tax Residency Certificate (TRC):**
30% + applicable surcharge and cess (effective \~25.75% if you consider lower rate with surcharge).
However, often the gross rate is 30% (plus cess).
* **With valid TRC:**
As per the India-USA Double Tax Avoidance Agreement (DTAA), the tax rate on fees for technical services or commission is generally **15%** or **20%** (verify specific clause).
---
### 3. **What if the foreign intermediary does NOT have PAN in India?**
* If the foreign payee does not provide PAN, **TDS rate is increased by 20% over normal rate** as per Section 206AA.
* So effectively, TDS rate can be up to **30% (or 20% + surcharge/cess)** or higher.
* Hence, **deduct TDS @ 30% (or the maximum rate under the Act)** if PAN is not available.
---
### 4. **Under which section?**
* **Section 195**: Tax deduction on payments to non-residents.
---
### 5. **Other considerations**
* Since the intermediary is linked to an Indian company director holding stake in both, **Transfer Pricing** rules may apply for international transactions. This is separate from TDS but relevant for pricing the brokerage amount.
---
### **Summary**
| Aspect | Details |
| -------------------- | ----------------------------------------------------------- |
| Is TDS applicable? | Yes, on brokerage/commission paid to foreign intermediary |
| Applicable section | Section 195 |
| TDS rate with TRC | As per India-USA DTAA, generally 15-20% |
| TDS rate without PAN | Higher rate under Section 206AA, up to 30% |
| Transfer pricing | Applicable due to common ownership, must be at arm’s length |
---
### What you should do:
* Deduct TDS on brokerage amount under Section 195.
* If PAN is not available, deduct TDS at higher rate as per Section 206AA.
* Obtain or request TRC from intermediary for lower DTAA rate.
* File TDS returns accordingly and issue Form 16A (or equivalent) to intermediary.
* Consider Transfer Pricing compliance due to related-party status.
---
If you want, I can help draft a TDS calculation example or draft a formal email requesting PAN/TRC from intermediary. Would you like that?
---
### 1. **Is TDS deductible on brokerage paid to foreign intermediary?**
* Yes, TDS is applicable on payments to a non-resident (foreign company) for services or commission/brokerage.
* Such payments are treated as **"fees for technical services" (FTS)** or **commission** under Indian Income Tax Act.
* TDS provisions apply under **Section 195** of the Income Tax Act for payments to non-residents.
---
### 2. **What is the applicable TDS rate?**
* **Without Tax Residency Certificate (TRC):**
30% + applicable surcharge and cess (effective \~25.75% if you consider lower rate with surcharge).
However, often the gross rate is 30% (plus cess).
* **With valid TRC:**
As per the India-USA Double Tax Avoidance Agreement (DTAA), the tax rate on fees for technical services or commission is generally **15%** or **20%** (verify specific clause).
---
### 3. **What if the foreign intermediary does NOT have PAN in India?**
* If the foreign payee does not provide PAN, **TDS rate is increased by 20% over normal rate** as per Section 206AA.
* So effectively, TDS rate can be up to **30% (or 20% + surcharge/cess)** or higher.
* Hence, **deduct TDS @ 30% (or the maximum rate under the Act)** if PAN is not available.
---
### 4. **Under which section?**
* **Section 195**: Tax deduction on payments to non-residents.
---
### 5. **Other considerations**
* Since the intermediary is linked to an Indian company director holding stake in both, **Transfer Pricing** rules may apply for international transactions. This is separate from TDS but relevant for pricing the brokerage amount.
---
### **Summary**
| Aspect | Details |
| -------------------- | ----------------------------------------------------------- |
| Is TDS applicable? | Yes, on brokerage/commission paid to foreign intermediary |
| Applicable section | Section 195 |
| TDS rate with TRC | As per India-USA DTAA, generally 15-20% |
| TDS rate without PAN | Higher rate under Section 206AA, up to 30% |
| Transfer pricing | Applicable due to common ownership, must be at arm’s length |
---
### What you should do:
* Deduct TDS on brokerage amount under Section 195.
* If PAN is not available, deduct TDS at higher rate as per Section 206AA.
* Obtain or request TRC from intermediary for lower DTAA rate.
* File TDS returns accordingly and issue Form 16A (or equivalent) to intermediary.
* Consider Transfer Pricing compliance due to related-party status.
---
If you want, I can help draft a TDS calculation example or draft a formal email requesting PAN/TRC from intermediary. Would you like that?
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