TDS on Commission

This query is : Resolved

CA Koustubh Vishnu Bhatye (Querist)
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09 April 2010 If the invoice is raised in Foreign Currency for Export Commission by Indian Party and the payment is to be made in INR, whether TDS is to be deducted? If yes, under which Section?

CMA.Palani Arumugam

CMA.Palani Arumugam (Expert)
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09 April 2010 TDS to be deducted u/s.194H.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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09 April 2010 IF PAID TO INDIAN PARTY @ 10% U/S 194H.
IF PAID TO NON RESIDENT @ 30.9% U/S 195

CA Ashok Kumar Sahu

CA Ashok Kumar Sahu (Expert)
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09 April 2010 agree with sanjayji

taxindiaconnect

taxindiaconnect (Expert)
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09 April 2010 Section 195 of the Act casts an obligation on an resident tax payer making payment to a non resident in respect of an income taxable in India to withhold tax at the rates applicable.

As per section 9 the income of a resident by way of commission is not treated to deemed to accrue and arise in India, the income will not be taxable in India. The on sales commission income no TDS is required to be deducted. CBDT has also issues a circular on this in the year 2005. The text of the same is reproduced here under for your ready reference.

Non-resident agent operating outside the country - As clarified earlier in Circular No. 23, dated 23-7-1969 (see under section 5), where the non-resident agent operates outside the country, no part of his income arises in India, and 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 were therefore, held to be not taxable in India. This clarification still prevails, in view of the fact that the relevant sections [section 5(2) and section 9] have not undergone any change in this regard. No tax is therefore deductible under section 195 from export commission and other related charges payable to such a non-resident for services rendered outside India.—Circular : No. 786, dated 7-2-2000.

However this circular has been withdrawn during the FY 2009-10, still one can claim that the TDS is not applicable under section 195 on Sales commission as the income is not accruing and arising to non resident in India. Hope, this clarifies your issue.

taxindiaconnect

taxindiaconnect (Expert)
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