Tds under section 195
This query is : Resolved
28 August 2013
If an Indian company is using services of a USA company to get its Foreign Receipts realized into Indian Currency received from the Foreign Client in USA.
Will TDS be liable to be deducted on such commission charged by the USA based company for services provided?
Please reply.
Will TDS be liable to be deducted on such commission charged by the USA based company for services provided?
Please reply.
28 August 2013
Hi
Non-residents making payments to non-residents are liable to TDS if the payments are chargeable to tax in India (228 ITR 487-AAR).
Exchange rate on the day on which TDS is required to be deducted has to be considered.
Payer can make a reference by simple letter on letter head/plain paper to Assessing Officer u/s. 195(2) of the Act (under Rule 10) if he opines that only portion of payment is going to be taxed and hence a request is made for determination of the amount on which tax has to be deducted.
An application u/s 195(3) can be made by the payee to the AO for no deduction of tax for receipt of sums other than dividends or interest. (Form 15D). Certificate is valid for the financial year specified therein unless cancelled by AO anytime before the expiry of the financial year.
An application u/s 197 can be made by the payee to the AO for no deduction of tax or at a lower rate of tax than rate prescribed to be deducted. (Form 13).
Certificates u/s 195(3) and u/s 197 are not appealable.
U/s 195 a non-resident is not entitled to basic/threshold exemption in respect of LTCG.
Tax has to be deducted at rates prescribed under relevant Finance Act or at the rates prescribed/specified in treaty, whichever are beneficial to the assessee. Treaty is an option to the assessee.
In case treaty rates are opted by the remittee/payee/recipient, take residency certificate of payee/receiver to determine DTAA of which country has to be applied.
Furnish the information in Form 15CA, verified in the manner prescribed. Rule 37BB.
Form No. 15CA to be then electronically uploaded on designated website
Take printout of Form No. 15CA, sign and manually file with bankers/authorized dealers of the payee along with copy of Form 15CB. Approach Bank and ask them for remittance with cheque/account debit.
Refund of TDS u/s 195 in certain circumstances – Circulars 790/20.4.2000 & 7/23.10.2007.
Non-residents making payments to non-residents are liable to TDS if the payments are chargeable to tax in India (228 ITR 487-AAR).
Exchange rate on the day on which TDS is required to be deducted has to be considered.
Payer can make a reference by simple letter on letter head/plain paper to Assessing Officer u/s. 195(2) of the Act (under Rule 10) if he opines that only portion of payment is going to be taxed and hence a request is made for determination of the amount on which tax has to be deducted.
An application u/s 195(3) can be made by the payee to the AO for no deduction of tax for receipt of sums other than dividends or interest. (Form 15D). Certificate is valid for the financial year specified therein unless cancelled by AO anytime before the expiry of the financial year.
An application u/s 197 can be made by the payee to the AO for no deduction of tax or at a lower rate of tax than rate prescribed to be deducted. (Form 13).
Certificates u/s 195(3) and u/s 197 are not appealable.
U/s 195 a non-resident is not entitled to basic/threshold exemption in respect of LTCG.
Tax has to be deducted at rates prescribed under relevant Finance Act or at the rates prescribed/specified in treaty, whichever are beneficial to the assessee. Treaty is an option to the assessee.
In case treaty rates are opted by the remittee/payee/recipient, take residency certificate of payee/receiver to determine DTAA of which country has to be applied.
Furnish the information in Form 15CA, verified in the manner prescribed. Rule 37BB.
Form No. 15CA to be then electronically uploaded on designated website
Take printout of Form No. 15CA, sign and manually file with bankers/authorized dealers of the payee along with copy of Form 15CB. Approach Bank and ask them for remittance with cheque/account debit.
Refund of TDS u/s 195 in certain circumstances – Circulars 790/20.4.2000 & 7/23.10.2007.
28 August 2013
Sir
In my case the Indian Co. won't be paying any money separately for services.
The USA client will pay the amount in dollars to the company that will give us service of currency conversion. The said company will deduct its commission from the total amount received and remit the Indian co. the balance amount.
What would be done in such a case?
In my case the Indian Co. won't be paying any money separately for services.
The USA client will pay the amount in dollars to the company that will give us service of currency conversion. The said company will deduct its commission from the total amount received and remit the Indian co. the balance amount.
What would be done in such a case?
29 August 2013
Hi
As per Your question, you have appointed a US company for converting foreign exchange into Indian Currency of our client situated at USA. So actually u are taking service of US co for which you are going to pay.
The second point in your query is that, your US co already deducting amount of commission from total amount of foreign currency received. So, confirm that this commission is the only payment of US Company as a hiring charges.
So as per my understanding, you will get the certificate from such US party about the total amount of commission and deduct tax, if applicable under section 195 of IT ACT.
Other views are also solicited.
As per Your question, you have appointed a US company for converting foreign exchange into Indian Currency of our client situated at USA. So actually u are taking service of US co for which you are going to pay.
The second point in your query is that, your US co already deducting amount of commission from total amount of foreign currency received. So, confirm that this commission is the only payment of US Company as a hiring charges.
So as per my understanding, you will get the certificate from such US party about the total amount of commission and deduct tax, if applicable under section 195 of IT ACT.
Other views are also solicited.
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