Tds paid on foreign payment
This query is : Resolved
28 June 2013
Dear Experts,
An Indian Company has paid USD 545 to a Dubai based Company as the registration fees of the conference to be held in Dubai. The registration fees of the conference is USD 545 only. The firm remitted the whole USD 545 and then paid the TDS thereon out of its pocket in the month of March @ 20%. Is there any violation of the any section under the Income Tax act?
An Indian Company has paid USD 545 to a Dubai based Company as the registration fees of the conference to be held in Dubai. The registration fees of the conference is USD 545 only. The firm remitted the whole USD 545 and then paid the TDS thereon out of its pocket in the month of March @ 20%. Is there any violation of the any section under the Income Tax act?
28 June 2013
NO TDS DEPOSITED BY YOU ITS NOT MATTER ITS PAID BY YOU OR DEDUCTED FROM DUBAI BASED COMPANY
29 June 2013
There would be no disallowance then. I am right to interpret it like this?
27 July 2025
Here's a clear explanation regarding TDS on foreign payments like your case:
### Situation:
* Indian company paid **USD 545** to a Dubai-based company for conference registration.
* Indian company paid **entire USD 545** to the Dubai company (no TDS deducted at source).
* Indian company paid TDS of 20% **out of its own pocket** (i.e., did not deduct TDS from payment).
---
### Important points:
1. **Applicability of TDS on Foreign Payments:**
* Under **Section 195 of the Income Tax Act**, any payment to a non-resident liable for tax deduction at source.
* The payer (Indian company) is **responsible to deduct TDS** at the applicable rate before remitting the payment.
* Paying TDS "out of pocket" (i.e., without deducting from the payment) is **not the prescribed procedure** but may be accepted to avoid disallowance or penalty.
2. **Is it a Violation?**
* Technically, if TDS is **not deducted at the time of payment** (i.e., deducted from the payment to the non-resident), it is a violation of Section 195.
* However, if TDS is paid subsequently by the Indian company (even out of pocket), the Income Tax Department usually considers the TDS compliance done.
* No penalty or disallowance should arise as long as TDS is deposited timely.
3. **Effect on the Dubai Company:**
* Since the payment was made in full, Dubai company receives the entire amount.
* Indian company bears the TDS liability and has paid tax on behalf of Dubai company.
4. **No Disallowance:**
* If TDS is paid to the government, whether deducted or paid separately, the Indian company generally **won't face disallowance of the expense**.
---
### To summarize:
* Yes, **technically you should have deducted TDS before remitting USD 545**.
* Since you paid TDS from your own pocket, it is acceptable, and **no violation or disallowance** will typically arise.
* The Indian company is still compliant if the TDS was paid timely.
---
If you want, I can help you draft a clarification or prepare documentation for this treatment. Would you like that?
### Situation:
* Indian company paid **USD 545** to a Dubai-based company for conference registration.
* Indian company paid **entire USD 545** to the Dubai company (no TDS deducted at source).
* Indian company paid TDS of 20% **out of its own pocket** (i.e., did not deduct TDS from payment).
---
### Important points:
1. **Applicability of TDS on Foreign Payments:**
* Under **Section 195 of the Income Tax Act**, any payment to a non-resident liable for tax deduction at source.
* The payer (Indian company) is **responsible to deduct TDS** at the applicable rate before remitting the payment.
* Paying TDS "out of pocket" (i.e., without deducting from the payment) is **not the prescribed procedure** but may be accepted to avoid disallowance or penalty.
2. **Is it a Violation?**
* Technically, if TDS is **not deducted at the time of payment** (i.e., deducted from the payment to the non-resident), it is a violation of Section 195.
* However, if TDS is paid subsequently by the Indian company (even out of pocket), the Income Tax Department usually considers the TDS compliance done.
* No penalty or disallowance should arise as long as TDS is deposited timely.
3. **Effect on the Dubai Company:**
* Since the payment was made in full, Dubai company receives the entire amount.
* Indian company bears the TDS liability and has paid tax on behalf of Dubai company.
4. **No Disallowance:**
* If TDS is paid to the government, whether deducted or paid separately, the Indian company generally **won't face disallowance of the expense**.
---
### To summarize:
* Yes, **technically you should have deducted TDS before remitting USD 545**.
* Since you paid TDS from your own pocket, it is acceptable, and **no violation or disallowance** will typically arise.
* The Indian company is still compliant if the TDS was paid timely.
---
If you want, I can help you draft a clarification or prepare documentation for this treatment. Would you like that?
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