Tds on foreign consultancy services

No relaxation from T.D.S provisions would be available. Instead, you must convince the non-resident that T.D.S deducted u/s.195 would be available as a credit against tax payable in Russia at the time of filing of return of Income as per Article-23, Paragraph-1 of Agreement for the avoidance of double taxation and prevention of fiscal evasion with Russian Federation: by virtue of Notification: GSR 507(E) [No. 10677 (F. No. 501/6/92-FTD)], dated 21-8-1998 * 

Text of India-Russia DTAA: Where a resident of Russia derives income which, in accordance with the provisions of this Agreement, may be taxed in India, the amount of tax on that income payable in India may be credited against the tax imposed on that resident of Russia. The amount of credit, however, shall not exceed the amount of the tax on that income computed in accordance with the taxation laws and regulations of Russia.

Indeed, if you failed to convince the Non-resident then T.D.S debited to profit and loss account may be disallowed as you have evidence of expenditure (Bill or Invoice as the case may be) to the extent of gross amount only.

Thanks Mr. Ayyappa Nuli,  for the guidance.    As per your advice we should not bear it as an expense it should be deductible from their consultancy and remit TDS so that they can claim the same when they file their tax return.

Reg,

G.Kannan

Reg,

G.Kannan

Yes, they can claim provided same income taxable in Russia also.