We are making payment to our sister concern in Thailand. This payment are in nature of 1. Payment for IT services and support provided by Thailand 2. Some common expenses incurred by Thailand on our behalf and reimbursed by us
My query is whether a) TDS is attracted as per section 195? b) Also TDS is applicable on reimbursements?
DTAA exists between India and Thailand still TDS applicable? If yes is it the same rate @ 10.3% with PAN and 25.75% without PAN? Looking forward for your valuable inputs.
22 January 2015
Dear Experts, I need you expert opinion of below issue. We are making payment to our sister concern in Thailand. This payment are in nature of 1. Payment for IT services and support provided by Thailand 2. Some common expenses incurred by Thailand on our behalf and reimbursed by us My query is whether a) TDS is attracted as per section 195? b) Also TDS is applicable on reimbursements? DTAA exists between India and Thailand still TDS applicable? If yes is it the same rate @ 10.3% with PAN and 25.75% without PAN? Looking forward for your valuable inputs. Thanks!
03 August 2025
Here’s a detailed expert opinion on your queries regarding withholding tax (TDS) on payments to a sister concern in Thailand:
1. Applicability of TDS u/s 195 on Payment for IT Services & Support Section 195 of Income Tax Act mandates TDS on payments made to non-residents for services rendered in India.
If the IT services/support are rendered outside India (i.e., Thailand), then no TDS is attracted on such payments because the income is not deemed to accrue or arise in India.
If services are rendered in India (even if paid to foreign company), then TDS is applicable.
Also, check if the foreign company has a Permanent Establishment (PE) in India. If yes, payments attributable to PE may attract TDS.
2. TDS Applicability on Reimbursements Reimbursements of expenses incurred by foreign company on your behalf are generally not subject to TDS, provided these are genuine reimbursements, supported by invoices, and do not represent income or profit to the foreign company.
However, if the reimbursement includes any mark-up or profit component, that portion may attract TDS.
Proper documentation is crucial to establish the nature of these payments as pure reimbursements.
3. Effect of India-Thailand DTAA India and Thailand have a Double Taxation Avoidance Agreement (DTAA) which generally provides relief from double taxation.
Under the DTAA, tax on fees for technical services or royalties may be limited to a specified rate (often 10%).
However, applicability depends on the nature of payment and services.
4. Rates of TDS If TDS is applicable:
Rate would be as per DTAA (likely 10% plus applicable surcharge and cess).
If the recipient has not furnished PAN, TDS is deducted at a higher rate, i.e., 30% plus surcharge and cess (which adds up approximately to 31.2% or more depending on surcharge).
Your mentioned rates 10.3% with PAN and 25.75% without PAN do not align exactly with standard TDS rates. Typically, surcharge and cess push rates slightly higher than 10% or 30%.
Summary & Recommendations Payment Type TDS Applicability Rate IT Services (Rendered Outside India) No TDS under Section 195 Nil IT Services (Rendered in India) Yes, subject to DTAA limits ~10% (plus surcharge/cess) Reimbursements (Pure) No TDS Nil Reimbursements (With Mark-up) TDS applicable on profit portion As above
Ensure proper documentation to prove place of service and nature of reimbursements.
Obtain Tax Residency Certificate (TRC) and PAN of foreign entity to claim DTAA benefits and lower TDS rates.
You may consider filing a certificate under Section 197 with the Income Tax Department to get a lower or NIL deduction certificate if applicable.
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