Tds on foreign payment

Originally posted by : pallavi jain
	our company has made payment for technical services to a company in Germany on which we have deducted TDS at the rate of 10% as per DTAA norms.Now we have to file the TDS return which is asking for PAN. Since German company does not have PAN number therefore we are unable to file the same. My question is whether TDS should have been deducted at the rate of 20% since PAN is not available and if not so then how the TDS return is to be filed

Yes, TDS should have been deducted @ 20% in your case as PAN wasn't provided (Section 206AA).   In case TDS is not deposited within due date, liability for short deduction default & interest thereon arises.

Before entering into agreement with you the foreign party should have applied for PAN in india, if not TDS @ 20% has to be deducted.

bt it says that if DTAA is applicable then there is no need for PAN. It was also decided by tribunal in serum institute of India ltd.

please read page no 7 of this case

SEC 206 AA OF INCOME TAX ACT HAS OVERRIDDING EFFECT ACCORDING TO THIS SEC "

Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i)  at the rate specified in the relevant provision of this Act; or

(ii)  at the rate or rates in force; or

(iii)  at the rate of twenty per cent.

SO U HAVE TO DEDUCT TDS @ 20% 

I agrre with you Neha mam. As per sec 206AA it should be 20%. But pls read these 2 pages, the marked part. This has been taken from Taxman's direct tax ready reckoner.