Tds on payment to non resident company
This query is : Resolved
Lokesh Jain
(Querist)
19 September 2015
Invoice for Testing Charges raised by Korean company to us(limited co.), Is TDS require to deduct on such payment and if Yes, what should be the rate of TDS ??
The payee does not have PAN card and no permanent establishment in India.
The payee does not have PAN card and no permanent establishment in India.
Lokesh Jain
(Querist)
23 September 2015
Please Suggest me, What should be the answere ???
27 July 2025
Here’s what applies for **TDS on payment to a non-resident Korean company for Testing Charges**:
---
### 1. **Is TDS required to be deducted?**
* Yes, **TDS is required under Section 195 of the Income Tax Act** on payments made to non-resident companies, unless specifically exempted by DTAA or other provisions.
* Testing charges will be considered **fees for technical services (FTS)** or **business income**, depending on the nature of services.
---
### 2. **Applicability of DTAA between India and Korea**
* India and South Korea have a DTAA (Double Taxation Avoidance Agreement).
* As per the **India-Korea DTAA**, fees for technical services (Article 12 or relevant article) may be taxable at a reduced rate or exempt if no Permanent Establishment (PE) exists.
* Since the Korean company **does not have PE in India**, income may not be taxable in India **if the DTAA exempts or provides for lower rate**.
---
### 3. **TDS rate**
* If DTAA applies and exempts income (no PE), then **no TDS may be required**.
* Otherwise, if TDS is required:
* **Normal rate under Indian law for fees for technical services (Section 194J) is 10% plus surcharge & cess**.
* If no PAN is provided, as per **Section 206AA**, TDS rate increases to **20%** or higher rate specified under DTAA.
---
### 4. **Summary**
| Situation | TDS Applicability | Rate of TDS |
| ------------------------------------------------- | -------------------------------- | ------------------------------------- |
| Payment to non-resident Korean company without PE | DTAA to be checked for exemption | If exempt, **no TDS** |
| If taxable under India tax laws | TDS under Section 195 | 10% + surcharge & cess |
| If no PAN furnished | Higher rate under Section 206AA | 20% or DTAA rate, whichever is higher |
---
### 5. **What should you do?**
* **Obtain a declaration from the Korean company** regarding PE status and tax residency certificate (TRC) to apply DTAA benefits.
* If no TRC or DTAA benefits, deduct TDS at **20% (due to no PAN)** on gross payment.
* File **Form 15CA & 15CB** as required under foreign remittance provisions.
---
If you want, I can help draft a checklist for you to verify before making payment or assist with Form 15CA/15CB details. Need help with that?
---
### 1. **Is TDS required to be deducted?**
* Yes, **TDS is required under Section 195 of the Income Tax Act** on payments made to non-resident companies, unless specifically exempted by DTAA or other provisions.
* Testing charges will be considered **fees for technical services (FTS)** or **business income**, depending on the nature of services.
---
### 2. **Applicability of DTAA between India and Korea**
* India and South Korea have a DTAA (Double Taxation Avoidance Agreement).
* As per the **India-Korea DTAA**, fees for technical services (Article 12 or relevant article) may be taxable at a reduced rate or exempt if no Permanent Establishment (PE) exists.
* Since the Korean company **does not have PE in India**, income may not be taxable in India **if the DTAA exempts or provides for lower rate**.
---
### 3. **TDS rate**
* If DTAA applies and exempts income (no PE), then **no TDS may be required**.
* Otherwise, if TDS is required:
* **Normal rate under Indian law for fees for technical services (Section 194J) is 10% plus surcharge & cess**.
* If no PAN is provided, as per **Section 206AA**, TDS rate increases to **20%** or higher rate specified under DTAA.
---
### 4. **Summary**
| Situation | TDS Applicability | Rate of TDS |
| ------------------------------------------------- | -------------------------------- | ------------------------------------- |
| Payment to non-resident Korean company without PE | DTAA to be checked for exemption | If exempt, **no TDS** |
| If taxable under India tax laws | TDS under Section 195 | 10% + surcharge & cess |
| If no PAN furnished | Higher rate under Section 206AA | 20% or DTAA rate, whichever is higher |
---
### 5. **What should you do?**
* **Obtain a declaration from the Korean company** regarding PE status and tax residency certificate (TRC) to apply DTAA benefits.
* If no TRC or DTAA benefits, deduct TDS at **20% (due to no PAN)** on gross payment.
* File **Form 15CA & 15CB** as required under foreign remittance provisions.
---
If you want, I can help draft a checklist for you to verify before making payment or assist with Form 15CA/15CB details. Need help with that?
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