TDS Deduction for NR

An Indian Company is required to make payment of Technical Fees of Rs. 5 Lakh to a foreign Company. Indian TDS rate is 10%. That Foreign Company does not have PE in India.

This Technical Fee is in the nature of Business income for that foreign Company.

Now as per Article 7 of DTAA – Business Profit:  Business Income is taxable in India if that foreign company has PE in India and that income is attributable to that PE.

And As per Article 13 of DTAA - ROYALTIES AND FEES FOR TECHNICAL SERVICES AND PAYMENTS FOR THE USE OF EQUIPMENT:  TDS rate is 5%.

Now my query is :

Is the Indian Company required to deduct TDS @ 5% as per Article 13 or no TDS deduction required as per Article 7 since that Fee is business income for that Foreign Company?

Replies (6)

Is there any use of equipment?

Or just technical/professional fees?

Go with sec 195 of IT act...

Originally posted by : Dhirajlal Rambhia
Is there any use of equipment?

Or just technical/professional fees?

Go with sec 195 of IT act...

Sir it is just professional fees for services provided in India. No use of Equipment.

Though certain other documentation formalities need to be completed eg (i) Tax Residency certificate issued by the home country (ii) Declaration in Form 10F as prescribed by IT rules (iii) Self-declaration by non-resident in relation to a permanent establishment in India etc.   .... based on these formalities, you can deduct TDS at 5%, provided specified under the DTAA.

Originally posted by : Dhirajlal Rambhia
Though certain other documentation formalities need to be completed eg (i) Tax Residency certificate issued by the home country (ii) Declaration in Form 10F as prescribed by IT rules (iii) Self-declaration by non-resident in relation to a permanent establishment in India etc.   .... based on these formalities, you can deduct TDS at 5%, provided specified under the DTAA.

Agreed Sir.

But why it does not come under Article -7 Buisness Profit since it is in the nature of Business income for Foreign Company?

Foreign company can avail any advantage under DTAA, (for lower tax benefit), but such declaration is to be given to deductor.

For some knowledge refer the attachment..

https://www.aksaa.qa/images/PDF/BUSINESS_PROFITS.pdf

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