TDS u/S 195

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)
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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..

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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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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