We are supposed to make a payment to an Indian shipping agent and that agent has offered a discount if we pay him directly in USD instead of INR.
I wish to know on which value the TDS will be calculated.Whether we need to convert USD to INR then deduct TDS then convert it back to USD. Also, on what date shall we calculate the exchange rate for conversion to INR.
| Yes, TDS under domestic TDS provisions applies even when payment is made in foreign currency to a resident Indian company. Here is the position: 1. TDS Applicability: The currency of payment (INR or foreign currency) does not exempt the transaction from TDS under Chapter XVII-B of the Income Tax Act. TDS is triggered by the nature of payment and the residential status of the payee — not the currency. 2. Which Section Applies: Depends on the nature of payment: - Professional/Technical services: Section 194J (10% or 2% as applicable) - Contract payments: Section 194C (1% individual/HUF, 2% others) - Commission/brokerage: Section 194H (5%) - Rent: Section 194I (10%) 3. Rate of TDS and Exchange Rate: TDS is deducted on the INR equivalent of the foreign currency payment. Use the SBI TT buying rate (or RBI rate) on the date of credit or payment (whichever is earlier) to compute the INR value for TDS deduction purposes. 4. Non-Resident Confusion: Section 195 applies to payments to NON-RESIDENTS. For a resident Indian company receiving payment in USD/EUR etc., domestic TDS sections (194C/194J etc.) apply, not Section 195. 5. Form 15CA/CB: If the foreign currency is remitted from India, Form 15CA/CB compliance under FEMA is also required, irrespective of TDS. |
Shyam S Gupta and Company
New Delhi
CA Inter
View Details
Goodwin Pumps India Pvt Ltd
Chengalpattu
CA Inter
View Details
M N Rao & Associates LLP
Vijayawada
CA Inter
View Details
CCI
Pro
CAclubindia
