TDS ON FOREIGN VENDOR

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SATISH (Querist)
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08 July 2011 Dear Experts,

There is a foreign vendor to whom amount paid for architecture and designing,let me know the section under which it come for tds purpose and tds rate. Is any surcharge applicable, if yes then above how limit surcharge to be levy, is there any agreement between these two party for tds purpose.

your kind reply will be highly appreciated.

Thanking you,

Arihanth Jain

Arihanth Jain (Expert)
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09 July 2011 Firstly, if the foreign vendor is an individual then refer to the DTAA-article on 'independent personal services', such an income of the vendor may not be taxable in India depending upon having a fixed base or number of days stay in India.

Secondly, if the foreign vendor is a company then such services should fall under fees for technical services. Refer to the DTAA-article on 'royalty & fees for included services', such an income may not be taxable in India assuming that there is no knowledge transfer to the Indian party in the present case.

Surcharge if applicable, is only if the payment is above Rs 1 crore @ 2.5%.

Other views are also welcomed.

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
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10 July 2011 THE AAR IN GMP INTERNATIONAL Gmbh (2010) 35 (II) ITCL 390 (AAR) HELD ARCHITECTURAL CONSULTANCY TO BE TECHNICAL SERVICE SO THE PAYMENT WOULD BE FEES FOR TECHNICAL SERVICE
NOW THE QUESTION ARISES AS TO TAXABILITY IN INDIA
FOR THIS ONE WOULD HAVE TO REFER TO SECTION 9(1)(vii)
THIS SECTION PROVIDES THAT
income by way of fees for technical services payable BY a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India
SO IT APPEARS THAT INJ THIS CASE THE PAYMENT IS TAXBLE IN INDIA SO LIAB TO DEDUCT TAX ARISES
TAX HAS TO BE DEDUCTED AT 10.3 IF PAYMENT IS TO NON-COREPORATE ASSESSEES OR CORPORATE ASSESSEE BUT DOES NOT EXCEED 1 CRORE[IF EXCEEDS THEN AT 10.506]
RELEVANT DTAA MAY ALSO BE REFFRED TO

CA MANOJ GUPTA
JODHPUR
09828510543

Arihanth Jain

Arihanth Jain (Expert)
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11 July 2011 As per the recent explanation added to Sec 9(2), income of a non-resident shall be deemed to accrue or arise in India under clause(v) or clause(vi) or clause(vii) of sub-section(1) and shall be included in the total income of the non-resident, whether or not,—
(i)the non-resident has a residence or place of business or business connection in India; or
(ii)the non-resident has rendered services in India.
Therefore the above referred architect fees is anyway taxable in India u/s 9 unless DTAA provides any relief.

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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12 July 2011 As per technical explanation to India-US DTAA architectural services if provided by a foreign Company do MAKE AVAILABLE technical services under the Fee for Included services Clause of India-USA DTAA. So if the services are being provided by a foreign company then the services shall be taxable in India.

Anuj
0-9810106211

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