TDS on payment to foreign company

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This query is : Resolved

ATUL U ANAVEKAR (Querist)

16 November 2010 In my case, payments are made by resident to foreign company as below:
salary 11902
travelling 3109
total 15011

I undertstand that as per section 195 and section 9, the above payments are taxable in India.
KINDLY CONFIRM THE BELOW:

1. As the rate specified in DTAA between India and Germany is 10, can i deduct TAS at 10 instead of 10.3%(according to IT Act).

2. Should I deduct TAS on the entire amount of 15011 or only on 11902 beacause 3109 paid as travelling is only reimbursement and hence not taxable in India.

Kindly guide...

CA. VIKAS GUPTA

CA. VIKAS GUPTA (Expert)

17 November 2010 Hi,
Section 195 does'nt deal with salary payments to non residents. If in DTAA, 10% rate is specified, TDS should be deducted as per DTAA only.

ATUL U ANAVEKAR

ATUL U ANAVEKAR (Querist)

17 November 2010 Hello Vikas,
Kindly note the correction:

It is not Salary but Fees for Techincal Service for provision of techinical staff by a Foreign Company.

ATUL U ANAVEKAR

ATUL U ANAVEKAR (Querist)

17 November 2010 Kindly guide

CA. VIKAS GUPTA

CA. VIKAS GUPTA (Expert)

17 November 2010 Hi,
in that case also, u will have to verify the DTAA provisions and TDS will be deducted as per the rates specified in DTAA since the DTAA provisions prevails.

thanks

ATUL U ANAVEKAR

ATUL U ANAVEKAR (Querist)

17 November 2010 Thank you Vikas,, laslty as there are two components namely Fees for Technical Service(FTS) and Travelling Expenses,
Should tax be deducted only on FTS or on both(FTS+Travelling)

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)

17 November 2010 @Atul
Withholding tax shall be deducted only on Fees for Technical services only & not for reimbursemet of Expenses.
You can kindly gothrought the case of
1. ACIT vs.Medicon network India Ltd 14 SOT 204.
2. HNS India VSAT Inc.vs.Dy.DIT(2005) 95 ITD 157
There are one case Samsung Case karnataka HC which is against our argument.

ALSO PL NOTE THAT IF THE GERMAN VENDOR DOES NOT HAVE PAN IN INDIA, WITHHOLDING TAX SHALL BE 20%

CA. Anuj Gupta

CA. Anuj Gupta (Expert)

17 November 2010 If the foreign party has provided documentary proof for reimbursement of expenses then no TDS liability on reimbursement portion should be there but if there is a consolidated bill and documentary proof are not provided, the TDS shall be required to be deducted on entire amount. Also the foreign party should have PAN otherwise the TDS shall be @20% and not 10%.

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