09 May 2009
We have investment of 26% of foreign company in an Indian company. Indian company has appointed non exective directors from this foreign company(based in Japan) . We have to reimburse travelling exps of these directors for attending meeting also to pay sitting fees to them. As per DTAA between India and japan it is written that sitting fees may be taxed in India.
Can u please reply as to withholding tax on reimbursement of exps and sitting fees to non executive non resident directors of an Indian company
09 May 2009
tax is not required to be deducted on the reimbursement of expenses... yet tds need to be deducted on the sitting fees payable to teh directors
09 May 2009
As per article 16 of DTAA between India and Japan the sitting fees paid to a director being resident of a contracting state may be taxed in other contracting state. Thus the sitting fees is fully taxable in the state where it is arising. So sitting fees paid to a director being resident in Japan, the entire income by way of sitting fees is taxable in India. You need to confirm (in writing) from the director that he does not have any other income taxable India. If he provides that confirmation than you need to withhold tax from sitting fees after allowing all the deductions / exemption available to an Individual. In the absence of information withhold at the maximum rate of tax. For example if the sitting fees does not exceed Rs 150K, no need to withhold tax at all. If the sitting fess is Rs 200K the tax would be Rs 5K + SC and EC. if the sitting fees is 500K then tax would be 55K = Applicable SC and EC.
On your second query regarding withholding tax on reimbursements of travel expenditure, if the the travel expenditure are supported back to back by the original bills / ticket, no withholding required, otherwise deduct TDS on the entire amount reimbursement @ 10%.
CAclubindia
