TDS on imports

Hi Nidhi — this is a very relevant and often misunderstood topic. Let's clarify:

🧾 Your Question:

“Do we need to deduct TDS on payment to the importer?”

We’ll interpret this as: "Should I deduct TDS when I am making payment to a non-resident/importer for imported goods?"

✅ Short Answer:

❌ No, TDS is generally not required on payments for import of goods, provided it is a business transaction involving only sale of goods and no services or royalty/technical fees are involved.

🔍 Detailed Explanation:

📘 Under Section 195 of the Income Tax Act:

TDS is to be deducted only if:

The payment is made to a non-resident, AND
The payment is chargeable to tax in India

Now, if you are importing goods (raw materials, components, products) from a foreign supplier, and:

It's a pure sale-purchase transaction, and
There's no element of service, royalty, or technical fee, and
The foreign party has no permanent establishment (PE) in India

👉 Then the payment is NOT taxable in India, and hence no TDS is required.

❗ But Be Careful — TDS May Be Required in These Cases:

Scenario	TDS Applicable?	Remarks
Pure import of goods	❌ No	No taxability in India
Payment for services from abroad (e.g., consultancy, software support)	✅ Yes	TDS u/s 195
Import of software license (with royalty element)	✅ Yes	Treated as royalty in many cases
Composite contracts (goods + services)	✅ Maybe	You must split values
Payment to foreign agent for commission	✅ Yes	TDS u/s 195 if taxable in India

📌 CBDT Clarification:

The CBDT has clarified in many circulars and case laws (e.g., GE India Technology Centre Pvt. Ltd. v. CIT, SC) that:

"TDS under section 195 is applicable only if the payment is chargeable to tax in India."

✅ Best Practice:

If there’s any doubt, it's advisable to:

Obtain a CA certificate (Form 15CB) confirming TDS is not applicable, and
File Form 15CA (required for most foreign remittances)

✅ Summary:

Question	Answer
Is TDS required on import payments to a foreign supplier?	❌ No, for pure imports of goods
When is TDS applicable?	✅ If services, royalty, or technical fees are involved