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Tds on foriegn allowance

CHANDRASEKHAR REDDY (Asst.Manager- Finance & Accounts) (91 Points)

29 October 2012

Hi Good evening to everyone,

Please note that we have one project running in Mozambique ( South Africa), we have to send engineers for implementation work of Networking at project.

We want to pay $1200 tax free allowance to employee, please suggest us how we have to mention terminology in company records and taxation rules.

Maximum how much we can pay to employees per day as perdium in dollars? is there any limit to pay as perdium?

Apart from above $1200 company has arranged Accomodation, local conveyance, Mobile expenses, electricity etc.

Please suggest us its most urgent.

Regards

Chandrasekhar

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7 Replies

Yogesh Kumar (Job) (180 Points)
Replied 30 October 2012

Please let me know whether you have any permanent establishment in South Africa.

CHANDRASEKHAR REDDY (Asst.Manager- Finance & Accounts) (91 Points)
Replied 30 October 2012

Yogesh,

We took the house for rent and our employees keeps travelling to Mozambique for IT implementation and project management but we dont have any office in Mozambique

Yogesh Kumar (Job) (180 Points)
Replied 30 October 2012

Upto my understanding TDS will not be deductible,since its just a petty cash to meet day to day expenses and it will be accounted as a cost of project however if the money is transfer through any money transfer agent then TDS may be applicable on the service charges paid to agent.

Saket Sinha (Student) (129 Points)
Replied 30 October 2012

As mentioned by you that you are paying 1200 tax free allowance to your employees, tax free meaning needs to be clarified. If company has a policy of giving some allowance to such employees who opts for going outside India then it is taxable in the hands of employees it can never be tax free. It is to be clubbed in employees salary because it forms part of salary. and TDS provisions are applicable.Secondly, the time period for which the employees go outside India for execution of projects will determine their residential status.Therefore , Sec40 needs to be referred in this regard. otherwise the expenditure will be disaalowed while calculating the taxable income of your company.

As far as the question regarding payent done by company for providing residential accomodation in South Africa TDS needs to be deducted refer Sec40.

As far asquestion regarding tax taxability arising in the hands of company the provisions of DTAA will be referred in this regard.

DTAA or income tax act provisions which is more beneficial shall apply.

Yogesh Kumar (Job) (180 Points)
Replied 31 October 2012

Section 40 define the ineligibility in case on non deduction of TDS but the liabitiy to deduct TDS is defined under section 195 (on foreign remitance) and other sections defined under Chapter XVII.

Now in you case if the amount is taxable in the employee hand then TDS should be deducted otherwise not. Now in your case upto my understanding TDS should be deducted section 192 as the amount given will be added to their salary.

Saket Sinha (Student) (129 Points)
Replied 31 October 2012

Since employees are going out of India , because of employment ,therefore any amount given to employess arising out of his job resposibilities must be added to salary . and TDS to be deducted as per sec192.

Sec195 attracted only in cases where company is paying to any non resident or foreign company like company is paying for rent accomodation etc in that case TDS is to be deducted under this section.

Sec192 is attracted where salary is given to resident or non resident.

Sec195 is attracted when payment is made to non resident or foreign company for any sum payable .