TDS U/S 195

This query is : Resolved

Rajesh G Prajapati (Querist)
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16 November 2009 We have purchased spares in India from U.K.
For final product we have to do some labour work and for this people from UK will come in India and do the labour work on it.We have to make payment for such labour bill.Whether TDS is to be deducted on this amount? If TDS is applicable then tell under which Artilce of DTAA and rate of TDS.

CA SANJAY MUKHERJEE

CA SANJAY MUKHERJEE (Expert)
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16 November 2009 Yes, If the nature of payment is fees for technical services then rate is 10% or may be 20% for fisrt 5 years and 15 % for subsequent years.

Check DTAA WITH UK for details.see article 13

https://www.allindiantaxes.com/uk%20.php

Sunil

Sunil (Expert)
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16 November 2009 Deduction is in nature of Technical Fees. Even if you do not apply the DTAA, if you wish to apply Section 9 of Income Tax Act, the rates in force as per Income Tax Act is 10% for agreements entered into after 1/6/2005 provided it is approved by Central Government. If the fess you are paying is for your project that is under automatic approval in the Industrial Policy, Central Government Approval is deemed to be granted. There are tribunal decisions for this. However, if you wish to apply our IT Act Directly without DTAA, then as per Section 206AA the payee needs a PAN otherwise 20% will have to be deducted. If the recepient in UK does not have the PAN, It may be better to use the DTAA so that it over rides section 206AA. In the DTAA, the rate is 20% during the 1st Five years of the Convention (when India and UK signed the DTAA) and 15% thereafter. As the DTAA was signed in 1993, the rate would be 15%.

You pick what is most beneficial to the payee. In both cases your payee will get relief against taxes suffered in India from the UK Tax ON THIS INCOME ONLY.

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