Tds on freight payment for import of goods

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 March 2012 Dear friends,
Pls advise me on below transaction:-
co. has imported goods and now they want to make payment for freight for same to non resident shipping co./agent.
1. i have to prepare form 15CB, pls confirm me if TDS is to be deducted on said freight payment to non resident shipping co.
2. co. has to furnish declaration "that payment is being made to the non resident engaged in the shipping business, for carriage of passengers, livestock mails and / or goods shipped at port of India and such non-resident is liable to pay Income Tax u/s 172 of Income Tax Act, 1961"
Pls advise me at earliest.
Regards
CA Abhinav Garg
9999923487
ca.abhinavgarg @ yahoo.co.in

Arihanth Jain

Arihanth Jain (Expert)
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28 March 2012 1. TDS shall be nil.
2. Question seems unclear.

Querist : Anonymous

Querist : Anonymous (Querist)

29 March 2012 Dear Arihanth Kumar Jain, pls advise as per section 195 and 172.

if TDS is nil then why bank is asking to furnish declaration that said non resident shipping co./agent is liable to pay incometax under section 172.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 Here’s a clear explanation to address your concerns regarding **TDS on freight payment to a non-resident shipping company** for **import of goods**:

---

### ✅ **1. Is TDS deductible under Section 195 on ocean freight paid to non-resident shipping company?**

🔹 **No**, **TDS is *not* required** to be deducted **under Section 195** if the payment is made to a **non-resident shipping company** for **carriage of goods from a foreign port to an Indian port**.

🔹 Instead, such payments fall under **Section 172** of the Income Tax Act, which is a **special provision for taxation of shipping business of non-residents**.

---

### 📜 **Section 172 – Key Points:**

* Applicable when **non-resident shipping companies** (or their agents) earn freight income from carriage of goods, passengers, etc., shipped at a port in India.
* **Tax is levied directly on the shipping company/agent** on a presumptive basis at the rate of **7.5% of gross freight**, taxed at the normal rate applicable to foreign companies.
* The **agent or shipping line is responsible** for paying this tax **before the ship leaves India**, and **not the importer (payer)**.

---

### ✅ **2. Why is the bank asking for a declaration?**

The bank needs assurance that:

* The **non-resident recipient is engaged in the shipping business**, and
* The freight **falls under Section 172**, not Section 195.

📌 That’s why the bank is asking for a declaration like:

> "The payment is being made to a non-resident engaged in the business of operation of ships for carriage of goods shipped at a port in India, and such non-resident is liable to tax under section 172 of the Income Tax Act, 1961."

This declaration helps the **bank justify not deducting TDS under Section 195** and **proceed with foreign remittance** as per **Rule 37BB** (related to Form 15CA/15CB compliance).

---

### ✅ **3. Role of Form 15CB (from a CA):**

* In Form 15CB, as a Chartered Accountant, you can certify that:

* The remittance is covered under **Section 172**, and
* **TDS is not deductible under Section 195**,
* The declaration from the company has been obtained,
* Payment is towards freight for goods shipped to India.

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### 📌 Summary Table:

| Query | Answer |
| ---------------------------------- | ----------------------------------------------------------------------- |
| Is TDS required u/s 195? | ❌ No, if payment is to non-resident shipping company for import freight |
| Why not u/s 195? | Because Section 172 overrides 195 for such cases |
| Who pays tax? | Non-resident shipping co. or their agent in India |
| What must importer submit to bank? | Declaration citing Section 172 applicability |
| Form 15CB remarks? | Mention exemption from TDS due to Sec. 172 |

---

Let me know if you’d like a sample **declaration format** or draft **Form 15CB note** to include this explanation.

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