Tds on non resident

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This query is : Resolved

chirag mantri (Querist)

10 July 2012 Dear All,

Please guide about the below mention query:

If Royalty is paid to Non Resident Company then at which rate TDS should be deducted in case if it has no PAN No.
As per DTAA with Switzerland, the amount to be tax @ 10% but as per new provision of TDS if there is no PAN No. then TDS should be deducted @20%.

It is very cumbersome process to obtain PAN No. and if TDS is deducted @20% then it has to file Income Tax Return and that is also not feasible for Non Resident.

So please guide me what will be the rate of TDS and why?..

Regards,

CA CS Chirag Mantri

Jinesh Bhagdev

Jinesh Bhagdev (Expert)

10 July 2012 Assuming that the Royalty is taxable in India, if the non-resident does not have a PAN, you would be required to deduct tax at 20%. You do not have any other option.

Either the NR can apply for PAN and you can deduct the tax at a lower rate or let the tax be deducted at 20%.

It is not necessary for the NR to file its return in India. The other alternative available to the NR is to claim tax credit for the taxes deducted in India in the return of income filed in Switzerland.

Only when the Non-resident desires to claim refund of the taxes in India, he may be required to file return of income in India. Else he may take tax credit for the taxes deducted in India.

MEHUL SHAH

MEHUL SHAH (Expert)

30 March 2013 I agree with Jinesh. Also after amendment of definition of Royalty which has been made wider, all Software Payments shall be deemed to be royalty.

Hence it is recommended to confirm with NR that he shall have to procure PAN to effect lower rate of deduction as per DTAA.

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