TDS u/s 195
This query is : Resolved
11 August 2009
If company is paying testing fees outside India whether tds u/s 195 is applicable or not please explain.
11 August 2009
Generaly yes
11 August 2009
195 of the Act casts an obligation on a resident tax payer making payment to a non resident in respect of an income taxable in India to withhold tax at the rates applicable. The tax is not required to be deducted from the payments made outside India to a NR if the income of NR is not taxable in India. The income of the NR is taxable in India if it satisfies certain conditions.
As per section 5 the income of NR should have been either be received or deemed to be received in India or should be accrue or deemed to accrue in India for such income to be taxable in India.
As per section 9 the income of a resident by way of fees for service for procuring the machinery would be treated as technical fees and will be deemed to accrue and arise in India, the income will be taxable in India with in the meaning of deeming provision under section 9 of the Act as the explanation 2 to section 9 (1) (vii)
However As per section 90 of IT Act one can take the benefit of provision of Double taxation Avoidance Agreements ( DTAA) on the payment of royalty if the recipient of the income from technical fees is a resident of a country with whom India has a DTAA. Currently India has DTAA’s with more then 75 Countries
As per section 5 the income of NR should have been either be received or deemed to be received in India or should be accrue or deemed to accrue in India for such income to be taxable in India.
As per section 9 the income of a resident by way of fees for service for procuring the machinery would be treated as technical fees and will be deemed to accrue and arise in India, the income will be taxable in India with in the meaning of deeming provision under section 9 of the Act as the explanation 2 to section 9 (1) (vii)
However As per section 90 of IT Act one can take the benefit of provision of Double taxation Avoidance Agreements ( DTAA) on the payment of royalty if the recipient of the income from technical fees is a resident of a country with whom India has a DTAA. Currently India has DTAA’s with more then 75 Countries
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