Tds on foreign payment
This query is : Resolved
CA Ankit Shah
(Querist)
06 December 2011
Company had taken FCNR loan from Foreign Bank OR any other Foreign resources. Whether interest Paid on such FCNR loan OR foreign resources liable to deduct TDS u/s.195?
CA. RICHI SAXENA
(Expert)
08 December 2011
Section 195.
(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.
The objective of section 195 is justifiable as it seeks to avoid a revenue loss as a result of tax liability in the hands of a foreign resident, by deducting the same from payments made to them at source.
The wording of section 195 specifies the “rates in force”. This term has been interpreted judicially to mean the lower of the rate between the Finance Act and the relevant DTAA . Further if the DTAA rate is applied and the term “income tax” is employed in the DTAA, it does not need to be augmented with any surcharge or Education cess. So it is imperative to check what provisions have been incorporated in DTAA with the relevant country.
CA. RICHI SAXENA
RICHI_SENSEX@YAHOO.COM.AU
(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.
The objective of section 195 is justifiable as it seeks to avoid a revenue loss as a result of tax liability in the hands of a foreign resident, by deducting the same from payments made to them at source.
The wording of section 195 specifies the “rates in force”. This term has been interpreted judicially to mean the lower of the rate between the Finance Act and the relevant DTAA . Further if the DTAA rate is applied and the term “income tax” is employed in the DTAA, it does not need to be augmented with any surcharge or Education cess. So it is imperative to check what provisions have been incorporated in DTAA with the relevant country.
CA. RICHI SAXENA
RICHI_SENSEX@YAHOO.COM.AU
CA. Anuj Gupta
(Expert)
12 December 2011
Yes, the interest is liable for TDS deduction u/s 195.
Also the compliance to provisions of FEMA need to checked.
Anuj
+91-9810106211
femaquery@gmail.com
Also the compliance to provisions of FEMA need to checked.
Anuj
+91-9810106211
femaquery@gmail.com
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