Royalty paid to non resident

A partnership firm  has entered an agreemrnt with foreign company by which it has to pay royalty for each quarterly sales as 2% of  Indian sales. Assume quarterly sales for march to be 50,00,000. Suppose on 24th march provision made in books for royalty payable & royalty actually paid on 4th April. Now on 24th march, dollar rate was 50 & on 4th april dollar rate was 51.

q1)  If liability has to be booked as % of indian sales, then  I think change of dollar rate should have no effect on booked liability. What is your opinion?

q2)  If If suppose I calculated the dollar on 24th march ((5000000*2%)/50=2000$), now on 4th april, I paid (2000$*51=102000), whether Rs. 2000 has to be transferred to foreign exchange fluctuation?

q3) Is there any implication on 31st march of AS 11?

points:

Royalty has to be paid as percentage of indian sales which has to be converted into dollars at time of payment.

 

What will be the difference if instead of partnership firm, it is company? 

Replies (2)
Originally posted by : DIVYA GOEL


A partnership firm  has entered an agreemrnt with foreign company by which it has to pay royalty for each quarterly sales as 2% of  Indian sales. Assume quarterly sales for march to be 50,00,000. Suppose on 24th march provision made in books for royalty payable & royalty actually paid on 4th April. Now on 24th march, dollar rate was 50 & on 4th april dollar rate was 51.

q1)  If liability has to be booked as % of indian sales, then  I think change of dollar rate should have no effect on booked liability. What is your opinion?

The dollar rate has no effect in your case.

q2)  If If suppose I calculated the dollar on 24th march ((5000000*2%)/50=2000$), now on 4th april, I paid (2000$*51=102000), whether Rs. 2000 has to be transferred to foreign exchange fluctuation?

Yes.


q3) Is there any implication on 31st march of AS 11?

points:

Royalty has to be paid as percentage of indian sales which has to be converted into dollars at time of payment.

 

What will be the difference if instead of partnership firm, it is company? 



 

1. Correct, no effect of dollar rate.

2. Transfer to Exchange gain/loss - Correct.

3. as-11 already complied if point 2 is followed.

Main concern should be regarding TDS, is there any DTAA .

 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
10 October 2026
Accounts Associate Level 1

Abic and Mani Chartered Accountants

Kottayam

B.Com

View Details
Company
12 October 2026
AUDIT , ACCOUNTS AND TAXATION

KDSS

New Delhi

B.Com

View Details
Company
ARTICLESHIP 07 October 2026
Article Trainee/ CMA Trainee

RMA And Associates LLP

New Delhi

CA Inter

View Details
Company
30 September 2026
Senior Accounts Executive

Codeboard Technology

Chennai

MBA

View Details
Company
20 September 2026
Semi Qualified CA

Navin & Associates

Mumbai

CA Inter

View Details
Company
ARTICLESHIP 18 September 2026
Industrial Trainee

Twenty Point Nine Five Ventures Private Limited

Noida

CA Inter

View Details
Company
08 October 2026
Account Executive

Elite Taxation

New Delhi

CA Foundation

View Details
Company
16 October 2026
CA article trainee

Zerdi & Co. Chartered Accountants

Pune

CA Inter

View Details