Section 195a

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:

Amount to be paid

1,00,000

Amount Grossed-up with TDS

1,11,111

(100000/90%)

TDS on B @ 10%

11,111

paid by the Company to the Government.

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:

Interest payable

1,00,000

TDS @ 10%

10,000

paying to Government

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.