TDS u/S 195

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 December 2009 Question is re TDS applicability and Rate of TDS under section 195 of IT Act'1961. Brief facts of the case is as follows-

Parent company is an US company providing Data base/Magagine etc online (Online Subscription and data base maintained by it. Parent Company directly provides database to Indian Customer. However, to raise invoices and collect payments from Indian Customers, a subsidiary company(Pvt Ltd) is in India which acts as a facilitator by raising the bills and collectiong payments to/from Indian Company and subsidiary company, finally, remits the amount so received to parent company net of its Commission.

G Muralidharan

G Muralidharan (Expert)

10 December 2009 Question is rather incomplete

Querist : Anonymous

Querist : Anonymous (Querist)

10 December 2009 Sir,

Kindly let me know what other information is required..

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

02 August 2025 Thanks for sharing the scenario! To advise accurately on **TDS applicability and rate under section 195** in this case involving a US parent company, its Indian subsidiary, and Indian customers, here are some key points and clarifications needed:

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### Key Points in Your Case:

* **Parent company (US) provides online database/magazine subscription directly to Indian customers.**
* **Indian subsidiary only raises invoices and collects payments on behalf of the parent company, deducting its commission.**
* The **subsidiary remits the net amount to the US parent company.**

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### Questions/Info Needed for Proper TDS Analysis:

1. **Nature of payments remitted to the US parent:**

* Is the entire subscription amount (net of commission) being remitted to the parent as revenue for online services?
* Or is it just a reimbursement of costs minus commission?
* Does the parent company have any other income from India?

2. **Does the parent company have a Permanent Establishment (PE) in India?**

* If yes, TDS implications may differ.

3. **Is the parent company providing the service directly to Indian customers or through the subsidiary?**

* You mentioned direct provision, but subsidiary handles invoicing and collections. This affects whether payments to parent are taxable in India.

4. **Has the parent company provided a Tax Residency Certificate (TRC) under the DTAA (India - US)?**

* This helps in deciding applicable TDS rate under DTAA provisions.

5. **Is the Indian subsidiary deducting TDS when paying commission to itself?**

6. **What is the contractual arrangement between parent and subsidiary?**

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### General TDS Applicability under Section 195 in such cases:

* If **payments to the US parent company are for services (online database access)**, this is considered **Royalty or Fees for Technical Services** under Indian Income Tax Act.
* **TDS must be deducted on the gross amount remitted to the parent company** at rates prescribed under DTAA (typically 10%) or Income Tax Act (30% plus cess/surcharge if no DTAA or no TRC).
* **Subsidiary acts as deductor** under section 195, responsible for withholding and remittance of TDS.

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### What else is needed:

* Full details on contracts, payment flow, and nature of services.
* Information on tax residency and whether parent company has PE in India.
* Copies of invoices, agreements.

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If you can provide these details, I can help you analyze:

* Whether TDS applies on entire remittance to parent.
* Applicable TDS rate.
* Whether any exemption or lower rate under DTAA applies.
* How Indian subsidiary should treat the commission and TDS.

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Feel free to share more info or ask for sample calculations or compliance guidance!

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