Withholding tax
This query is : Resolved
17 August 2012
whether withholding tax is applicable when we take buyers credit offer letter from HSBC BANK INDIA. PLEASE CLARIFY
17 August 2012
yes withholding tax is applicable subject to DTTA,
wHICH FOREIGN BRANCH OF HSBC BANK YOU HAVE TAKE BUYERS CREDIT?
wHICH FOREIGN BRANCH OF HSBC BANK YOU HAVE TAKE BUYERS CREDIT?
17 August 2012
HSBC, MAURITIUS BRANCH
17 August 2012
Current rate of withholding tax is 20%
17 August 2012
% is o.k. but it not applicable when buyers credit lending is from HSBC, MAURITIUS BECAUSE WE HAVE DTAA WITH MAURITIUS. PLEASE INFORM IS THIS O.K.
03 August 2025
Good question! Here’s a clear explanation regarding withholding tax on buyer’s credit from HSBC Mauritius:
Buyer’s Credit and Withholding Tax
Buyer’s credit is a type of short-term loan/finance facility extended by a foreign bank to an importer.
When you pay interest on buyer’s credit to a foreign bank (like HSBC Mauritius), Indian tax law requires you to deduct TDS (withholding tax) on that interest payment.
Applicability of Withholding Tax for HSBC Mauritius
India and Mauritius have a DTAA (Double Taxation Avoidance Agreement) which generally reduces or eliminates withholding tax on interest payments.
Under the India-Mauritius DTAA, the withholding tax rate on interest income is usually 10% or lower, and sometimes it can be exempt depending on the nature of the payment and whether it qualifies for treaty benefits.
If your payment qualifies under the treaty, withholding tax may be reduced or exempted, provided you follow the due procedure.
What you should do:
Check the exact nature of the interest payment and whether it qualifies for reduced treaty rate or exemption.
Obtain Tax Residency Certificate (TRC) from HSBC Mauritius to claim treaty benefits.
Submit Form 10F and declaration as prescribed by Indian tax law to the Indian bank or payer.
If all documentation is in order, deduct TDS at the reduced treaty rate (likely 10%) or nil if exempted as per treaty.
If you do not provide TRC or follow the procedure, the default Indian TDS rate (20%) will apply.
So, to answer your query:
Yes, withholding tax is applicable, but the rate is subject to the India-Mauritius DTAA.
You cannot simply assume zero withholding just because Mauritius is a treaty country—you must follow the proper documentation procedure to avail the benefit.
Buyer’s Credit and Withholding Tax
Buyer’s credit is a type of short-term loan/finance facility extended by a foreign bank to an importer.
When you pay interest on buyer’s credit to a foreign bank (like HSBC Mauritius), Indian tax law requires you to deduct TDS (withholding tax) on that interest payment.
Applicability of Withholding Tax for HSBC Mauritius
India and Mauritius have a DTAA (Double Taxation Avoidance Agreement) which generally reduces or eliminates withholding tax on interest payments.
Under the India-Mauritius DTAA, the withholding tax rate on interest income is usually 10% or lower, and sometimes it can be exempt depending on the nature of the payment and whether it qualifies for treaty benefits.
If your payment qualifies under the treaty, withholding tax may be reduced or exempted, provided you follow the due procedure.
What you should do:
Check the exact nature of the interest payment and whether it qualifies for reduced treaty rate or exemption.
Obtain Tax Residency Certificate (TRC) from HSBC Mauritius to claim treaty benefits.
Submit Form 10F and declaration as prescribed by Indian tax law to the Indian bank or payer.
If all documentation is in order, deduct TDS at the reduced treaty rate (likely 10%) or nil if exempted as per treaty.
If you do not provide TRC or follow the procedure, the default Indian TDS rate (20%) will apply.
So, to answer your query:
Yes, withholding tax is applicable, but the rate is subject to the India-Mauritius DTAA.
You cannot simply assume zero withholding just because Mauritius is a treaty country—you must follow the proper documentation procedure to avail the benefit.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- ITR-3 ignores Section 211 (1) (b) for Professionals u/s 44ADA
- EXEMPTION UNDER SECTION 54 FOR UNDER CONSTRUCTION FLAT
- Deduction for HUF
- Salary u/s 194C
- Nill TDS Return FY 2025-26
- Upload Level Validation Error
- How to add NRE account to income tax profile?
- Filing ITR U
- AY2025-26- Bug in ITR2 Online Filing - TDS Section related to Property Sale
- Form 10E requirement for Leave encashment and Gratuity received at retirement
- ERROR IN ITR3
- Rejection of Rectification by CPC
- GST ITC in ECL and GST PURCHASES DATA IN AIS
- GST rate on monthly hiring of commercial vehicle given for transportation.
- TAXABILITY OF STATE INSURANCE MATURITY RECEIPTS BY RAJASTHAN GOVERNMENT EMPLOYEE ON RETIREMENT ?
- Document to add trade name
- GST Partners addition
- Non-disclosure of Foreign Shares & Dividend in Past ITRs – How to Rectify & Report Now?
- ICWAI-Final best coaching center for online by English
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
Trending Online Classes
-
Input Tax Credit, GST refunds and Recovery of refunds- Roadblocks and way outs
CA Nipun Arora03 September 2025 -
GST LIVE Certification Course - 43rd Weekdays Batch(With Govt Certificate)
Industry Expert15 September 2025
CAclubindia
