Dear Sir/Madam
we have placed an AMC ( Annual Maintenance Contract) on a Foreign OEM. The vendor has performed the required task. However my finance team has deducted 10% as TDS for this service. Vendor claims that there should be no Tax deducted at source as already the income is being taxed in his country ( USA) .Kindly clarify how this works
TIA
Ravindra kumar
The finance team's 10% deduction does not align with current standard rates (it is either 20% plus cess under domestic law, or 15% under the US DTAA). However, under the India-USA DTAA, an AMC typically fails the "Make Available" clause and qualifies as business profits. If the US vendor provides a valid Tax Residency Certificate (TRC) and a formal "No Permanent Establishment (PE) in India" declaration, the income is completely exempt from tax in India, and the finance team should deduct 0% TDS.
Chirag N Shah & Associates
Mumbai
CA Inter
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