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tds on foreign payment

S. MOHAN (ACCOUNTS OFFICER) (104 Points)

20 April 2011

we are using foreign brand for running our restaurant and using technical assistance in the form of hiring of chefs & hostess to run the restaurant and other services. We have to pay incentive fees to this firm in vietnam. Please can we know the TDS percentage that has to be applied for this payment if the firm has PAN no in india and what is the percentage if PAN is not available and under which section and category of services we have to apply in form 15CB. Can we please have a reply for this query.

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6 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 20 April 2011

1) IN YOUR CASE TDS IS TO BE DEDUCTED ON THE PROFESSIONAL PAYMENTS MADE BY YOUR CO. TDS TO BE DEDUCTED U/S 195 @ 10%.

2) BUT IF THE DEDUCTEE DOES NOT HAVE PAN, THEN TDS TO BE DEDUCTED @ 20%.

REGARDS,

DEVENDRA K

CA. Arpita Singhal (Partner) (100 Points)
Replied 20 April 2011

1)In case the payee has PAN: TDS should be 10.3% (at 10% plus surcharge & edu cess assuming that your payments will exceed the threshhold limit) for fees for Professional Services & if there is a DTAA with Vietnam than rate as per DTAA will also be compared.

Rate as per IT or As per DTAA whichever is lower will be applicable.

2)If payee doesn't have a PAN Than final rate will be 20%

3) Section 195 is the applicable section for TDS on foreign payments

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7014 Points)
Replied 20 April 2011

Originally posted by : S. MOHAN
	we are using foreign brand for running our restaurant and using technical assistance in the form of hiring of chefs & hostess to run the restaurant and other services. We have to pay incentive fees to this firm in vietnam. Please can we know the TDS percentage that has to be applied for this payment if the firm has PAN no in india and what is the percentage if PAN is not available and under which section and category of services we have to apply in form 15CB. Can we please have a reply for this query.

The isue needs to be seen carefully. Apparently the the foreign brand payment shall be treated as royalty and technical assistance shall be treated as Fees for Technical Services . The royalty and FTS portion shall be taxable @ 10.5575% (in case the foreign party has PAN) or 20% otherwise.

But there is Delhi HC ruling and some other rulings which provide that there shall no deduction of TDS in such case, so the issue needs to be seen carefully with facts and figures.

Anuj

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