TDS on export sales commission to overseas agent

as per circular no 23 dated 23-7-1969,and related provisions of section 9 ,where the non resident agent operates outside the country,no part of his income accrues or arise in india and since the payemnt is usually remited abroad it can be said tht it is not taxable in india,though this circular has been withdrwan,however this clarification still prevails in view of section 5(2) and section 9 have not undergone any change,therefore no tax is deductible under section 195 from export commission and other related charges to such a non resident for services rendered out side india (circular no 786 dated 7-2-2000)

however this circular is also being withdrwan frm financial yr 2009-10,still one can claim TDS is not applicable under section 195 as sales commission income is not accruing or arising in india

also u cn check out the practice manual for CA final direct taxes where questions are being askd regarding export sales commission and they have also clarified tht it is not taxable

REGARDS

SRIPAL JAIN

it is not taxable under sec 9 of the act , but circular 23 withdraw

There is a case of Toshuku Ltd.(SC) and Spahi Projects Ltd.(AAR) whrein it has been held that export commission is not taxable in India.

Also in case of Seimens(Mum ITAT) it has been held the withdrawl of circular shall be from the date of issue of new circular withdrawing circular 23. Hence if the commission was paid before Octber 2009 then there is no siisue at all as your case shall be covered under circular 23 .

Thereafter you can take benifit of 2 case laws sited above.

Anuj

+91-9810106211

femaquery @ gmail.com

Dear Sir 

We are one of the merchant exporter and we are getting export order from Malaysian company for fabricated machines from mumbai for that intial amount 50% we get the advance amount and it may take more than 10 month to complete the fabrication of the machine. But our agent in Malaysia who is in purchase department he need the commission as and when we received the money 

here our banker say once the export is completed and after submitting the Bill of Lading, Shippment Bills, and exchange control copy then only the allow us to send the commission so in this regards we seek your  valuable advice 

Hafeez

Hi, I am no CA, so I cannot advice you the various sections dealing with it. However, I am paying my overseas agents since past many years. From my practical experience, I can safely say that no TDS is deducted while paying my overseas agents. However, as per rule, the banks do not send the payment to the overseas agent unless we mention the commission amount in the customs shiping bill- this is probably to make sure that we are getting the correct amount of DBK/DEPB on the actual net foreign exchange earned. (After all, we will be paying the commission in foreign exchange, so we must get the DBK benefit after deducting this commission amount from the total invoice amount).

In a nut shell- Just make sure you mention the commission payable amount in the shipping bill while exporting the goods, and you will be safe.