Tds on exhibition charges paid to foreign company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 March 2012 What is the applicable rate of TDS (IT Act and DTAA) where payment is made to Foreign company (UK based) towards exhibition charges which comprises of following:
[1] Grant of license to install a booth on the exhibition space provided (booth shall be provided by them)
[2] Full page advertisement in Event guide
[3] Utilities in the form of power supply,etc

Note that exhibition is held in India

Pankaj Gandhi Jaiswal

Pankaj Gandhi Jaiswal (Expert)
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10 March 2012 For deduction of TDS in case of Payment made to NR 1st thing we have to look that the payment amount should be income which is taxable in India and if this is not taxable in India then question of TDS does not arise, in given case the income of exhibitor neither accrue nor arise in India hence no income in India and NO TDS will be applicable.

Querist : Anonymous

Querist : Anonymous (Querist)

11 March 2012 Thanks for replying, but please note that exhibitions were held in India and therefore all services (i.e providing space to install booth, providing shell (tambu) for that booth, providing utilities like electricity, water,etc for functioning of booth and allowing advertisement in the event guide) all were rendered by the foreign company in the exhibition which was in India. Therefore it follows that all services were rendered in India and since payer of income is an Indian co. services are therefore utilised in India. Therefore the income accrues in India and hence taxable in India. Therefore question focuses on rate of TDS??

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Given your scenario where a **foreign company** (based in the UK) is providing exhibition-related services in **India**, and your company is making payments to this foreign entity, let's break down the **TDS applicability** and **rate of TDS** according to the **Income Tax Act** and **DTAA** (Double Taxation Avoidance Agreement) between **India and the UK**.

### **Key Points to Consider:**

1. **Nature of Services Provided**:
The foreign company is providing several services related to the exhibition held in India:

* Grant of license to install a booth.
* Full-page advertisement in the event guide.
* Providing utilities like power supply, water, etc.

2. **Taxability of the Services in India**:

* Since **all services** are being rendered **in India**, and the exhibition is also being held in **India**, the **income accrues and arises in India**. Hence, the income from these services is **taxable in India** under the provisions of the **Income Tax Act**.

3. **TDS Applicability**:

* Since the payment is being made to a **non-resident foreign company** for services rendered in India, **TDS will be applicable** under **Section 195** of the **Income Tax Act**, which governs payments to non-residents.
* The question now focuses on determining the correct **TDS rate**.

### **TDS Rate Under the Income Tax Act**:

1. **Section 195 (TDS on Payments to Non-Residents)**:

* The TDS rate under **Section 195** is typically based on the **nature of income**.
* In this case, the payment relates to **services provided in India** (like booth space, advertisement, and utilities), which would be considered **fees for technical services** or **business income** of the foreign company.

2. **Rate of TDS**:

* Generally, the **TDS rate for fees for technical services (FTS)** is **10%** (under Section 194J) or **20%** (under Section 195), **plus applicable surcharge and cess**.
* For **business income** under **Section 195**, the TDS rate can range from **20%** upwards, depending on the specifics of the nature of the payment.

Based on your description, the services rendered by the foreign company might fall under **fees for technical services** or **business income**. The rate could thus vary between **10%** and **20%**, depending on the exact categorization of the income.

### **DTAA between India and the UK**:

Since the foreign company is based in the **UK**, the **India-UK Double Taxation Avoidance Agreement (DTAA)** will also play a role in determining the applicable TDS rate. Under the **India-UK DTAA**, the TDS rate on **fees for technical services** may be reduced depending on the nature of the payment and the provisions of the agreement.

* **DTAA Provision**:

* Under the **India-UK DTAA**, the **maximum TDS rate on fees for technical services** is generally **10%** (plus applicable surcharge and cess).
* For **business profits** (if the payment qualifies as business income under the DTAA), the TDS rate can be **reduced** or **exempt** if the foreign company has a **permanent establishment (PE)** in India. If the foreign company does not have a PE in India, business income is **taxable only in the UK**, not in India.

### **Specific Services and Applicable TDS Rates**:

Let's look at the individual services provided and their likely tax treatment:

1. **Grant of License to Install a Booth and Providing Space**:

* This could be categorized as **business income** (since it's related to space rental and exhibition services). If the foreign company has no permanent establishment in India, this may be exempt from TDS under the **India-UK DTAA**. Otherwise, it may attract a **TDS rate of 20%** under **Section 195**.

2. **Full Page Advertisement in Event Guide**:

* This is likely to fall under **advertisement income** or **royalty**. Under **Section 9(1)(vi)** of the Income Tax Act, **royalty** is taxable in India and subject to TDS. Under the **India-UK DTAA**, the **TDS rate on royalty** is generally **10%**.

3. **Utilities (Power Supply, etc.)**:

* This could be classified as part of **service charges**, and if they fall under the purview of **fees for technical services**, they will likely attract a **TDS rate of 10%** or **20%** under Section 195 or 194J, depending on the specific nature of the service.

### **Conclusion**:

* **TDS Applicability**: Yes, **TDS** is applicable because the exhibition services were rendered **in India**.
* **TDS Rate**: The TDS rate will generally be **10%** on fees for technical services or **business income** under **Section 194J** or **Section 195**.
* **DTAA**: The **India-UK DTAA** may reduce the TDS rate to **10%** on fees for technical services. However, if the foreign company does not have a **permanent establishment** in India, certain business income may be exempt from TDS.

### **Action Points**:

* Confirm if the foreign company has a **permanent establishment** in India, as this would affect the TDS rate.
* Based on the nature of the services (technical services, advertisement, etc.), you may apply a **TDS rate of 10% or 20%** (depending on whether the income is categorized as business income or technical services).

If you're uncertain about the exact categorization or need assistance with filing the TDS, feel free to reach out!

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