With holding tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 June 2014 Dear Experts,

We have Imported the Plant & Machinery from Germany. the seller provided the services for installation, commissioning the P&M in india. now he raised the invoice for Technical services provided by him.

my question is :-

1. whether TDS need to be deducted
2. If Yes, than @ what rate ( under Income Tax or DTAA with Germany)

Please note that Seller does not have IRC certificate and PAN in india.

Please advise.

Rupesh Jain

Rupesh Jain (Expert)
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20 June 2014 u/s 195 you have to deduct the TDS @ 10% on payment to non resident . but you have to deduct the TDS @ 20% if the Germany company have not indian PAN.

Querist : Anonymous

Querist : Anonymous (Querist)

20 June 2014 Thanks. but tax rate under DTAA is 10%

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 You're right to point out the DTAA rate of 10% for technical services between India and Germany. Here’s a clear summary for your case:

1. TDS applicability:
Yes, you need to deduct TDS under Section 195 on payments made to the non-resident German company for technical services (installation and commissioning).

2. Rate of TDS:
Basic Indian tax law:

10% on technical services if PAN is provided.

20% if PAN is not provided (higher rate to discourage tax evasion).

DTAA between India and Germany:

The DTAA rate for technical services is generally 10%.

3. Since the German company does not have PAN:
You are required to deduct TDS at 20% as per Indian law because no PAN was furnished.

However, the beneficial DTAA rate of 10% can be applied only if the non-resident furnishes a PAN or you follow procedures to apply the DTAA benefit (which usually requires PAN and Tax Residency Certificate).

4. What should you do?
Deduct TDS @ 20% because of no PAN, and deposit with the government.

Inform the German company to obtain Indian PAN if possible to avail DTAA benefit of 10%.

They should provide a Tax Residency Certificate (TRC) from Germany to claim treaty benefits while filing their tax returns.

Summary:
Scenario TDS Rate Condition
No PAN provided 20% Indian law penalty rate
PAN provided + DTAA documents 10% DTAA rate applicable

Note: Non-deduction or short deduction can lead to disallowance and penalty for you as the deductor, so it is advisable to deduct as per rules.

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