Withholding tax u/s 195

This query is : Resolved

Subbaiya (Querist)
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23 August 2007 We are a company in India who have utilized the services of a recovery agent in US. The recovery agent has sent a invoice for US$8000 for collecting the dues from our customer.

Whether we have to deduct tax at source in respect of the payment? Since, the service is rendered outside India and payment will be received outside India, I presume the income is not taxable in India

Please advise

CA Mani

CA Mani (Expert)
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23 August 2007 It's based on DTAA between US & India - Whether to deduct or not deduct.

If US gives unilateral exemption - i.e. Exemption of tax paid in india, TDS can be deducted.

Otherwise, TDS - Not required, As there is no income arising in India.

Subbaiya

Subbaiya (Querist)
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23 August 2007 f

Subbaiya

Subbaiya (Querist)
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23 August 2007 a

Jitender

Jitender (Expert)
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23 August 2007 yes tds is applicable as per dtaa but where dtaa is silent ,income tax act is operative

Subbaiya

Subbaiya (Querist)
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23 August 2007 DTAA is as below

Article 15 - Independent personal services - 1. Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxable only in the first-mentioned State except in the following circumstances when such income may also be taxed in the other Contracting State :

(a) if such person has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

(b) if the persons stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant taxable year.

My query is the phrase "performance in the other Contracting State" doesnt it mean in India

whereas in our case the service was provided in USA

tarak

tarak (Expert)
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23 August 2007 As per DTAA, if TDS is applicable then the company has to deduct the Tax at source, otherwise not.-pl. refer Article-15

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