Section 195 & RCM for Foreign National

> Yes, in your case TDS has to be deducted (if Its not covered under Sec 115/special category or exempted service)

> You  have to check in IT dept / other relevent websites about the DTAA India entered with the specified nation. If yes, then obtain TRC, Form 10F (duly filled and attested) and self declaration. Form 10F and self declaration should contain assessee's PAN number and other relevant info.

>If its a normal business service (other than covered in Sec 115/special category) , then TDS has to be deducted at 30%rate 

> Non deduction of TDS shall lead to a penalty of 100% of amount of TDS failed to deduct (Sec 271C)

>Not only penalty, but the expenditure shall be disallowed fully u/s 40 (a) (i) (ie, the Indian company cannot claim the expenditure and has to pay the tax)

>regarding the GST, as per section 5(3) of IGST act read with serial number (1) of Notification 10/2017dated 28-06-2017, Indian company has to pay GST under reverse charge mechanism (being a importer of service ) 

Hi Manivel,  Thanks.

However I am not sure for below: If I get TRC and form 10F from an Individual Service Provider who is providing Professional Services, then do I have to deduct TDS?

I understand absence of TRC will attract TDS.  Can you please elaborate more on section 115.

second, in the absence of Pan, law states 20% TDS. So under which section 30% is applicable for foreign Individual Service providers?

Hi Manasi,

1. If you get Form 10F/TRC/Self declaration (by this time you will have the DTAA in your hand). If the income accrued to the Non resident is taxable in India as per the DTAA, then you have deduct TDS at the tax rate specified in the DTAA.

2.Section 115 deals with special rate (Concessional rate) of tax for Non resident/Foreign company. Few nature of business covered under 115 are Technical services/ Interest Income/ Income from GDR, bonds, debentures etc.. (For more details, kindly check on Income tax website about Sec 115, 194LA/LB/LC etc)

3.In absence of PAN, as per section 206AA, TDS should be (higher of below)

• At the rate specified in the relevant provision of the Act;
• At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20);
• At the rate of 20%

hence in our case, as per section 195, it is 30% to NR & 40% in case of foreign companies (i.e , rate specified under provision of Sec 195 is higher) 

Manasi,

want to add up one more thing, As per sec 90, assessee can avail the DTAA rate or sec 195 rate whichever is lower and beneficial for him at his option. So, If DTAA rate is less than 30%, then TDS shall be on the basis of DTAA

Hi Manivel,

Thanks, What is your opinion about below:

Regarding taxability of fees for IPS in the hands of NR  in India,  it is provided in almost all DTAAs that such income shall be taxable only in the country of residence of receiver and shall be taxable in India only in following 2 situations :

• the service provider has a fixed base regularly available to him in India for the purposes of performing his activities or
• the person stays  in India for more than a minimum period ( normally 90 days) in a fiscal year.

If the case is not covered in any of the above 2 situations, the income is not taxable in India and accordingly no TDS is required u/s. 195.

My case if individual Service provider from Spain, US,UK and Portugal for Professional services and nobody has travelled to India and they do not have fixed base in India. They have delivered the service from their country only.

Regards