Withholding of Tax u/s 195

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This discussion clarifies whether Tax Deducted at Source (TDS) under Section 195 of the Income Tax Act is applicable when providing incentives to foreign customers based on sales targets met in their country. The consensus is that such incentives paid to a non-resident are not considered income deemed to accrue or arise in India, therefore, TDS deduction is not required.

Avinash Yedire

Avinash Yedire (Expert)
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05 July 2023 Your positing is not found. Please repost your question.

Sandy

Sandy (Querist)
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13 July 2023 Dear Sir,

We are going to export some goods to foreign customer. We have an agreement according to which we will provide some incentives to such customer if he fulfills the criteria relating to quantity sale in his country. We want to know whether there is need to deduct TDS u/s 195 at the time of payment of such incentives ? Whether such incentives would be considered as income deemed to accrue or arise in India in the hand of foreign customer ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 July 2023 No, such incentives paid to non resident does not deemed to accrue or arise in India in the hands of foreign customer.
TDS deduction under section 195 not applicable for such payment to non resident.

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