| A QUERY | |||||||||||||
| In case of u/s 195A, where the payment is to be made to a Non-resident & subject to TDS u/s 195, the payer of | |||||||||||||
| Income has to bear the TDS on behalf of Non-Resident and pay to the Government. And the Payer has to Gross up | |||||||||||||
| the Amount of payment and charge TDS on that Grossed up Amount ; and pay balance amount to the Non-Resident. | |||||||||||||
| For example. | |||||||||||||
| A company has to pay Professional Charge to a Non-Resident of Rs. 100000/- on which TDS of 10% is to be deducted. (ignore Surcharge & Cess). | |||||||||||||
| Here Actually the Non-Resident has to get Rs.90000/- (after TDS). | |||||||||||||
| But as per sec.195A, if the Company has to bear TDS on that Amount then following Computation has to be made: | |||||||||||||
| A | Amount to be paid | 1,00,000 | |||||||||||
| B | Amount Grossed-up with TDS | 1,11,111 | (100000/90%) | ||||||||||
| C | TDS on B @ 10% | 11,111 | paid by the Company to the Government. | ||||||||||
| D | Balance amount received by | ||||||||||||
| the Non-Resident | 1,00,000 | Ultimately the Non-Resident is getting full amount without TDS. | |||||||||||
| Now my query is: | |||||||||||||
| A 100% EOU has taken loan from a Foreign Bank ( Bank of the Country in which that EOU company has its Parents Company) | |||||||||||||
| The EOU is paying Interest on that Loan on Quarterly Basis on which TDS u/s 195 is applicable. Suppose TDS @ 10% (ignore SC & cess) | |||||||||||||
| The EOU is computing like as below: | |||||||||||||
| A | Interest payable | 1,00,000 | |||||||||||
| B | TDS @ 10% | 10,000 | paying to Government | ||||||||||
| C | Balance Payable | 90,000 | But the EOU is paying full amount of Rs.100000/- | ||||||||||
| Here the EOU is paying Full Amount of Interest i.e. Rs.100000/- to the Foreign Bank and TDS of Rs.10000/- paid to Government. | |||||||||||||
| This TDS , the EOU accounted under Current Assets which is recoverable from that Foreign Bank and this TDS may be or may not be recovered. | |||||||||||||
| Here is that Computation or Treatment is correct keeping in mind section 195A. | |||||||||||||
| Please suggest. | |||||||||||||
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