Deduction of TDS in case of service from a Foreign Company

TDS 2472 views 2 replies

Navin Jhawar

COMPANY SECRETARY

24 Points Joined March 2009

Dear Professionals,

I have a specific query relating to deduction of TDS in case of technical service provided by a Foreign Company to a Resident Domestic Company,the query has been set in a couple of points for your valuable advise and guidance:

1. The Foreign company is based in Israel and is providing technical support to us wherein the work is performed from Israel and the Company is not having a permanent establishment is India hence no PAN.Will the same be treated as income deemed to accrue in India,moreover after changes proposed in the current Finance bill for taxing all the services provided by a non residend what is the consequence of the same.

2. Suppose the Finance bill get the nod and all the foreign payments for services provided by a non resident falls under the tax net,what will be tds rate at which the deduction need to be done considering the point that there is a DTAA in place with Israel which states about deduction of tds at not more than 10%.

3.The Changes in TDS rates with effect from 1st April 2010 which states for deduction of tax @ 20% where there is no PAN number of the deductee,will the same apply in the above instance since the foreign company is not having a PAN in India.The same need to be addressed keeping the provision of the Income Tax Act and the DTAA which says the DTAA will previal over the Income Tax Act.

PL advise me on the following points for better clarity on the subject.

Regards,

Navin J

Replies (2)

Nicky

Chartered Accountant

245 Points Joined October 2009

What i read from your query is that you are pretty clear about the whole issue and only need an authentication...

Rate of Tax would remain 10% as section 195, the section under which you do TDS provides for deduction at the income tax rates or DTAA whiever is lower so here 10% is a lower rate of Tax.

Jayant Khatri

Associate Manager - Commercial

22 Points Joined October 2010

Please advise if TDS should be deducted even if the "Offshore Engineering and Project Management" services are performed by the vendor from the Foreign HQ (permanent base) of the vendor.

In the same contract, there is another head of payment for "Supervision Services during Erection & Commissioning" provided by the engineers who travel to Project Site in India and render the supervision. We always deduct TDS on this head..

Thanks for your reply !