TDS U/S 195
This query is : Resolved
26 March 2010
Dear Sirs,
We have appointed a foreign designer in England to develope fresh designes for our products. He will send his designes over email, fax and/or courier. We shall make payment towards his services via normal banking channels in foreign currency. HE DOESNOT HAVE A PE or OTHER BUSINESS CONNECTION IN INDIA.
My Queries:-
1.Whether such payments attract TDS U/S 195 ?
2. If yes, then at what rate and under which head of service?
3. Is the foreign designer supposed to apply for Indian PAN ? If yes, HOW ?
4. Is it liable to service tax under the reverse charge mechanism?
Request all learned to reply at the earliest.
Thanks/Best Regards
G. Sharma
We have appointed a foreign designer in England to develope fresh designes for our products. He will send his designes over email, fax and/or courier. We shall make payment towards his services via normal banking channels in foreign currency. HE DOESNOT HAVE A PE or OTHER BUSINESS CONNECTION IN INDIA.
My Queries:-
1.Whether such payments attract TDS U/S 195 ?
2. If yes, then at what rate and under which head of service?
3. Is the foreign designer supposed to apply for Indian PAN ? If yes, HOW ?
4. Is it liable to service tax under the reverse charge mechanism?
Request all learned to reply at the earliest.
Thanks/Best Regards
G. Sharma
29 March 2010
URGENT .... KINDLY REPLY
02 August 2025
Here’s a detailed response to your queries regarding TDS u/s 195 on payments to a foreign designer in England:
---
### 1. Whether such payments attract TDS under Section 195?
* **Yes**, payments made to a non-resident for services rendered outside India are generally subject to TDS under Section 195 if the income is deemed to accrue or arise in India or is deemed to be received in India.
* In this case, payment to the foreign designer for designing services **may attract TDS** if the services are considered to have been utilized in India.
* Since the designer does **not have a Permanent Establishment (PE)** or business connection in India, the key test is whether the income is deemed to accrue or arise in India.
---
### 2. At what rate and under which head of service?
* **Nature of income:** Fees for technical services (FTS) or professional fees.
* Under the **India-UK DTAA**, the rate for fees for technical services or professional fees is generally **10%** (plus applicable cess).
* If no DTAA benefit is claimed, the rate under the Income Tax Act is **30%** plus surcharge and cess on gross payment.
* The exact nature (whether it qualifies as FTS under IT Act) depends on whether the service "makes available" technical knowledge or skill. Simple design services sent electronically usually qualify as FTS.
---
### 3. Is the foreign designer supposed to apply for Indian PAN? If yes, how?
* **Yes**, if the non-resident wants to avail lower DTAA rates and avoid higher TDS, obtaining a PAN is recommended.
* Procedure for PAN application by non-residents:
* Apply through the NSDL portal or UTIITSL with form 49A.
* Submit supporting documents such as passport, proof of address, and copy of DTAA certificate if applicable.
* PAN is issued even if the non-resident has no Indian address.
* Without PAN, TDS is deducted at a higher rate of **20%** as per Section 206AA.
---
### 4. Is it liable to service tax under reverse charge mechanism?
* Since the services are provided by a **non-resident**, **reverse charge under Service Tax (now GST)** is applicable on import of services.
* The Indian recipient is liable to pay service tax (or GST) under reverse charge on the value of services received.
* So yes, service tax/GST liability arises on the recipient for such foreign services under reverse charge.
---
### Summary:
| Query | Response |
| --------------------- | ---------------------------------------------------------------------------- |
| TDS applicability | Yes, TDS u/s 195 applicable if payment is deemed to accrue or arise in India |
| Rate of TDS | 10% under DTAA (India-UK), else 30% under IT Act |
| PAN requirement | Yes, advisable for lower TDS; apply through NSDL/UTIITSL |
| Service tax liability | Yes, reverse charge on recipient |
---
If you want, I can help draft a TDS compliance checklist or guide on PAN application for the foreign designer. Let me know!
---
### 1. Whether such payments attract TDS under Section 195?
* **Yes**, payments made to a non-resident for services rendered outside India are generally subject to TDS under Section 195 if the income is deemed to accrue or arise in India or is deemed to be received in India.
* In this case, payment to the foreign designer for designing services **may attract TDS** if the services are considered to have been utilized in India.
* Since the designer does **not have a Permanent Establishment (PE)** or business connection in India, the key test is whether the income is deemed to accrue or arise in India.
---
### 2. At what rate and under which head of service?
* **Nature of income:** Fees for technical services (FTS) or professional fees.
* Under the **India-UK DTAA**, the rate for fees for technical services or professional fees is generally **10%** (plus applicable cess).
* If no DTAA benefit is claimed, the rate under the Income Tax Act is **30%** plus surcharge and cess on gross payment.
* The exact nature (whether it qualifies as FTS under IT Act) depends on whether the service "makes available" technical knowledge or skill. Simple design services sent electronically usually qualify as FTS.
---
### 3. Is the foreign designer supposed to apply for Indian PAN? If yes, how?
* **Yes**, if the non-resident wants to avail lower DTAA rates and avoid higher TDS, obtaining a PAN is recommended.
* Procedure for PAN application by non-residents:
* Apply through the NSDL portal or UTIITSL with form 49A.
* Submit supporting documents such as passport, proof of address, and copy of DTAA certificate if applicable.
* PAN is issued even if the non-resident has no Indian address.
* Without PAN, TDS is deducted at a higher rate of **20%** as per Section 206AA.
---
### 4. Is it liable to service tax under reverse charge mechanism?
* Since the services are provided by a **non-resident**, **reverse charge under Service Tax (now GST)** is applicable on import of services.
* The Indian recipient is liable to pay service tax (or GST) under reverse charge on the value of services received.
* So yes, service tax/GST liability arises on the recipient for such foreign services under reverse charge.
---
### Summary:
| Query | Response |
| --------------------- | ---------------------------------------------------------------------------- |
| TDS applicability | Yes, TDS u/s 195 applicable if payment is deemed to accrue or arise in India |
| Rate of TDS | 10% under DTAA (India-UK), else 30% under IT Act |
| PAN requirement | Yes, advisable for lower TDS; apply through NSDL/UTIITSL |
| Service tax liability | Yes, reverse charge on recipient |
---
If you want, I can help draft a TDS compliance checklist or guide on PAN application for the foreign designer. Let me know!
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