TDS/WHT on payment to foreign agent

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This query is : Resolved

N. Patel (Querist)

25 April 2011 We are Indian manufacturer and have appointed an agent in UAE, Mauritius and Kenya. These agents will source orders for our products. Our clients will directly place order on us along with L/C on us. We have agreed to pay 20% commission to our agents, which includes customer service during warranty period.
My queries:
- Is there any restriction on commission payment? My CA was suggesting 20% is too high and IT dept will raise several queries.
- When we make payment to our agent, do we have to deduct TDS or Withholding tax? If yes, is it different for different countries - Kenya, Mauritius and UAE?
- Is there any restriction on when such payment can be made? In our first transaction, we have agreed to pay commission upon receipt of order and opening of LC.

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)

25 April 2011 rEPLY TO UR QUERY IS AS UNDER
1. THE DEPTT MAY LOOK INTO GENUINENESS OF THE PAYMENT BUT THERE IS NO RESTRICTION AS TO AMOUNT OF COMM THAT CAN BE PAID
2.IF THE AGENTS HAS NO PERMANENT ESTABLISHMEN IN INDIA THAN NO TAX DEDUCTIBLE
3. NO RESTRICTION

CA MANOJ GUPTA
JODHPUR
09828510543

CA. Anuj Gupta

CA. Anuj Gupta (Expert)

25 April 2011 Here the commission is not exactly commission but also includes customer service during warranty period. The Department shall try to cover the customer service during warranty period portion under FTS clause.

Also the payments since are being made to countries which are tax heavens hence there will be much more scrutiny from department.

I shall have lot of reservations in paying such commission at such rates unless the business expediency can be proved .

Anuj
0-9810106211

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