Save Rs 499 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

Foreign Taxation- Income deemed to accrue or arisen in India????

Tax queries 380 views 1 replies

Punit Govil

CA FINAL(1st grp passed) CS FINAL M.CO

228 Points Posted on 08 December 2019

Hi All,

Please reply on below query.

In current scenarios, Export factoring companies are financing Indian exporters on the basis of Receivable Purchase agreement. Simply they discount the sale invoice (80% Value) of Indian exporters, pay money next day to Exporter and on due date buyer of Indian Exporter pay directly to factoring Company. At last factoring company deduct their Interest/commission from the sale proceeds and return the remaining 20% value of invoice to Exporter.

Now my question is -

1- Is exporter liable to deduct TDS under section 195???

2- This income (for factoring company) will be deemed to accrue or arisen in India????

3- If factoring company says that It is covered under DTAA, then is it sufficient not to deduct TDS by Indian Exporter???

Please reply!

Replies (1)

krishnasudhir

AGM

24 Points Posted on 10 December 2019

Hi Punit,

Firstly, TDS under section 195 arises when Income is taxable in India. To decide the taxability nature of Income is very important. As per your above query, please verify in the 'Receivable purchase agreement' whether money received by factoring company is commission or interest.

If the same is in the nature of commission, for facilitating exports by Indian exporter, the income may not be taxable as per Income tax act. This is as per various judgements.

If the income is in the nature of Interest, the same is taxable as per the Act. Then, Please go through the DTAA with the respective country and see the taxability in DTAA. If the same is also taxable as per DTAA, then TDS needs to be deducted as per beneficial provisions of the Act or DTAA.

Also, Please note the requirements of PAN / TRC as per the Provisions of Section 206AA.

In case of any further questions, you can contact me at +91 9030909709