TDS on Export Freight

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CA CHETAN GUPTA (Querist)
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02 April 2021 Hello Sir,
No TDS is deductible on Export Freight paid to Foreign Shipping Companies or Agents of Foreign Companies in India. But the Companies are asking My Client to Report this Transaction in the TDS Return Form 26Q.

How to do this? I can't Find Any Flag there for Section 172 Exemption from 194C & 195. I tried reporting it Under Section 194C but there is no Appropriate Flag.

What to do, Kindly Guide.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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11 July 2024 If the transaction involves payments to foreign shipping companies or their agents for export freight, and these payments are exempt from TDS under Section 172 of the Income Tax Act, there are specific guidelines on how to report this in the TDS Return Form 26Q.

Here’s how you should proceed:

### Step-by-Step Guide:

1. **Identification of Exempt Payment**: Ensure that the payment made to the foreign shipping companies or their agents qualifies for exemption under Section 172. This section specifically exempts payments made for carriage of goods or passengers by any mode of transport other than railways in case of income derived from the operation of ships or aircraft.

2. **Reporting in Form 26Q**:
- **Nature of Payment**: Since there isn't a specific flag or section for Section 172 exemptions in Form 26Q, you should report this payment under the appropriate section that closely matches the nature of the payment. In this case, since it involves freight charges to foreign companies, you might consider reporting it under Section 194C.
- **No TDS Deduction**: When entering the details in Form 26Q, you should indicate that no TDS has been deducted. Usually, there is an option or checkbox to indicate "No deduction" or "Exempt" in the TDS return form.
- **Exemption Justification**: In the remarks or remarks for the collector section of Form 26Q, mention clearly that the payment is exempt under Section 172 of the Income Tax Act. You can include a brief note explaining the nature of the payment and the specific exemption provision under which it is exempted from TDS.

3. **Verification and Filing**: Before submitting the TDS return, ensure that all details are correctly filled in and verified. Double-check the amounts, nature of payment, and exemption status to avoid any discrepancies.

### Additional Points to Consider:

- **Documentation**: Maintain proper documentation supporting the exemption claim under Section 172. This could include copies of agreements, invoices, proof of export, etc.

- **Consultation**: If you are unsure about the correct reporting procedure, it’s advisable to consult with a tax professional or chartered accountant who can provide specific guidance based on your company’s situation.

By following these steps, you can appropriately report the exempt payments to foreign shipping companies in your TDS return Form 26Q without deducting TDS, while ensuring compliance with tax regulations.

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