With Holding Tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 November 2009 We are limited company doing business in domestic as well as offshore.We have to make the payment to the party for technical consulancy at Honkong that is limited company.The have provided services outside India and confirm their PE as they have no branches or offices in India.Further there is no DTAA in Hongkong.In this matter whether TDS is applicable or not.If TDS is to be deducted then under which DTAA clause?

Sunil

Sunil (Expert)
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14 November 2009 In case there is no DTAA and no BOPE or DAPE in India, you will have to deduct at rates in force as per Section 9 of the Income Tax Act. For Technical Fees the rate is 10% if agreement is after June 1, 2005 and approved by the Central Government. If the agreement is made as per Industrial Policy, the approval of Central Government is deemed Granted. Normally the rates for TDS to non residents where payee is other than company is 30% and 40% for companies. The deduction for Technical Fee is irrespective of PE status. Moreover in your case, as there is no DTAA, Section 206AA for compulsory PAN is applicable and you will have to deduct 20% without PAN. Section 206AA over rides Section 195 for the rates. DTAA as per Section 90 over rides the Income Tax Act to make whatever is more beneficial applicable to the assessee. However, for the deduction aspect it is not clear whether payer should deduct 20% and the assessee claim refund in returns for excess deduction.

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