Tds on non residenty

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Querist : Anonymous

Querist : Anonymous (Querist)

03 July 2013 WE HAVE TO PAY A BROKERAGE TO A NON RESIDENT WHO DOES NOT HAVE A BUSINESS CONNECTION IN INDIA, FOR A SERVICE PROVIDED OUTSIDE INDIA AND THE PAYMENT WILL BE MADE OUTSIDE INDIA IN A FOREIGN CURRENCY?
WEATHER WE SHOULD DEDUCTED TDS ? IF YES UNDER WHICH SECTION ? PLZ EXPLAIN

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
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04 July 2013 NO U NEED NOT TO DEDUCT TAX AS INCOME OF NR IS NOT TAXABLE IN INDIA.
CA MANOJ GUPTA]
JODHPUR
09828510543

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Querist : Anonymous

Querist : Anonymous (Querist)

04 July 2013 SIR THANK YOU ..... SIR, IT WOULD BE GRATEFUL OF YOU IF YOU CAN KINDLY PROVIDE ME WITH THE RELEVANT PROVISION/SECTION OR CIRCULAR IF ANY.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Sure! Here’s a clear explanation with relevant references for your query:

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### Situation:

* Paying **brokerage to a non-resident** who has **no business connection in India**.
* The **service is provided outside India**.
* **Payment is made outside India in foreign currency**.

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### Question:

**Is TDS applicable on this payment?**

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### Answer:

**No, you are not required to deduct TDS under the Income Tax Act for such payments.**

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### Reasoning:

1. **Taxability of income in India (Section 9 of Income Tax Act):**
Income is taxable in India only if it accrues or arises or is deemed to accrue or arise in India.
Since the brokerage service was **rendered outside India**, and payment is made outside India, this income does **not accrue or arise in India**.

2. **No Business Connection or Permanent Establishment in India:**
The non-resident broker **does not have any business connection or PE in India**. Hence, income earned from services outside India is not taxable in India.

3. **Section 195 - TDS on payments to Non-Residents:**
Section 195 mandates deduction of tax at source on payments to non-residents **if such payments are chargeable to tax in India**.
Since the income here is **not taxable in India**, no TDS deduction is required.

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### Relevant Legal Reference:

* **Section 195(1) of Income Tax Act:** Tax shall be deducted at source on sums payable to non-residents if such sums are chargeable to tax in India.
* **CBDT Circular No. 7/2011 dated 23.08.2011**: Clarifies that if income of non-resident does not arise or accrue in India, TDS under Section 195 is not required.
* **CBDT Circular No. 728 dated 12.05.1994:** Payment for services rendered outside India is not taxable in India, hence no TDS.

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### Summary:

| Condition | TDS Deduction Required? | Section/Reference |
| ------------------------------------------------------- | ----------------------- | --------------------------------- |
| Non-resident with no business connection or PE in India | No | Section 195 and CBDT Circulars |
| Service provided **outside India** | No | Section 9, Circular 7/2011 |
| Payment made outside India | No | Section 195 and related circulars |

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If you want, I can help draft an internal note or mail to your tax team referencing this for compliance.

Would you like me to do that?

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