TDS on repair charges done on exported Goods in Korea
This query is : Resolved
07 February 2025
Dear Sir,
We have exported the goods to Korea, but they have done re-work on the goods we exported.
We are required to pay USD 32,400.00 for the rework charges now.
Can we deduct the TDS from this payment?
Thanks.
We have exported the goods to Korea, but they have done re-work on the goods we exported.
We are required to pay USD 32,400.00 for the rework charges now.
Can we deduct the TDS from this payment?
Thanks.
12 August 2025
Key points:
Nature of payment:
The payment is for repair/rework service on goods exported to Korea.
Recipient:
The service provider is a non-resident (Korean entity).
TDS applicability under Indian law:
Section 195 of Income Tax Act mandates tax deduction on payments to non-residents if they are chargeable to tax in India.
Repair/service charges paid to non-residents are typically liable for TDS if the service is deemed to be sourced in India.
Place of provision of service (POPS) and source of income:
For cross-border services, whether the income is taxable in India depends on the place of provision of service.
If the service is provided outside India (i.e., the repair work physically happened in Korea), it may not be taxable in India, and thus TDS may not be applicable.
If the service is deemed to be provided in India (e.g., related to goods in India), TDS may be applicable.
Double Taxation Avoidance Agreement (DTAA):
India-Korea DTAA may provide specific rules on taxation of such income.
Typically, income from services performed outside India is not taxable in India.
Practical advice:
If the rework/repair physically happened outside India (Korea), no TDS is required on the payment.
You should take a declaration or certificate from the service provider confirming that the service was performed outside India.
Consult your tax advisor for specific facts and treaty interpretation.
Summary:
Condition TDS Required?
Repair service performed outside India Generally No
Repair service considered as provided in India Yes, TDS applies
Nature of payment:
The payment is for repair/rework service on goods exported to Korea.
Recipient:
The service provider is a non-resident (Korean entity).
TDS applicability under Indian law:
Section 195 of Income Tax Act mandates tax deduction on payments to non-residents if they are chargeable to tax in India.
Repair/service charges paid to non-residents are typically liable for TDS if the service is deemed to be sourced in India.
Place of provision of service (POPS) and source of income:
For cross-border services, whether the income is taxable in India depends on the place of provision of service.
If the service is provided outside India (i.e., the repair work physically happened in Korea), it may not be taxable in India, and thus TDS may not be applicable.
If the service is deemed to be provided in India (e.g., related to goods in India), TDS may be applicable.
Double Taxation Avoidance Agreement (DTAA):
India-Korea DTAA may provide specific rules on taxation of such income.
Typically, income from services performed outside India is not taxable in India.
Practical advice:
If the rework/repair physically happened outside India (Korea), no TDS is required on the payment.
You should take a declaration or certificate from the service provider confirming that the service was performed outside India.
Consult your tax advisor for specific facts and treaty interpretation.
Summary:
Condition TDS Required?
Repair service performed outside India Generally No
Repair service considered as provided in India Yes, TDS applies
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