TDS ON COMMISION PAID TO FORIEGN AGENT
This query is : Resolved
Deepak Biyani
(Querist)
21 July 2010
TDS on commision paid or payable to foriegn agent for the year 2009-2010 and 2010-2011 upto 9.9% of invoive amount.
Shudhanshu Agrawal
(Expert)
21 July 2010
TDS shall be applicable under Section 195 and rate will depend upon the date of the transaction.
21 July 2010
The following is an extract of Circular 786 dated 7th February, 2000.
“The deduction of tax at source under section 195 would arise if the payment of commission to the non-resident agent is chargeable to tax in India. In this regard attention to CBDT Circular No 23 dated 23.7.1969 is drawn, where the taxability of 'Foreign Agents of Indian Exporters" was considered alongwith certain other specific situations. It had been clarified then that where the non-resident agent operates outside the country, no part of his income arises in India. Further, since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments are therefore held to be not taxable in India. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No 23 shall prevails. No tax is therefore deductible under section 195 and consequently the expenditure on export commission and other related charges payable to a non-resident for services rendered outside India becomes allowable expenditure…….”
So section 195 is not attracted and therefore No tds is required. Since TDS is not required as per board's circular there cannot be any question of disallowance
“The deduction of tax at source under section 195 would arise if the payment of commission to the non-resident agent is chargeable to tax in India. In this regard attention to CBDT Circular No 23 dated 23.7.1969 is drawn, where the taxability of 'Foreign Agents of Indian Exporters" was considered alongwith certain other specific situations. It had been clarified then that where the non-resident agent operates outside the country, no part of his income arises in India. Further, since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments are therefore held to be not taxable in India. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No 23 shall prevails. No tax is therefore deductible under section 195 and consequently the expenditure on export commission and other related charges payable to a non-resident for services rendered outside India becomes allowable expenditure…….”
So section 195 is not attracted and therefore No tds is required. Since TDS is not required as per board's circular there cannot be any question of disallowance
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Shudhanshu Agrawal
(Expert)
21 July 2010
yeah i agree with you. Section 195 shall be applicable only when income of the non resident is taxable u/s 7 or u/s 9 of the Income Tax Act, 1961
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