Tds on interest to foreign bank

Need to deduct TDS @ 10% if pan no available futher if interest amount paid net then tds will be calculated on gross amount..

thank you Navin Sir....

Provisions of section 195(1) covers any sum paid to non-resident, such non-resident may be Indian branch of a foreign company for e.g. HSBC Bank, Citi Bank, etc.

Any sum paid to non-resident may include any type of payment. such payment may be taxable or may not be taxable subject to tax residency, DTAA provisions, PE etc.

To ensure all such compliance Form-15CB drafted in such a manner that it covered each and every payment made to non-resident. Taxability of such transaction depends upon answer of yes no part of the relevant clause questioner.


In view of above and to avoid any future dispute and penalty proceedings, I think that for making each and every payment to non-resident, we need to obtain form-15CB and to upload Form-15CA.

Read the articles at under mentioned link

/articles/tds-on-interest-paid-to-overseas-bank-9900.asp

nicely analysed by both Navin and Lekhraj.

Regards

Deduction required @ rate specified in finance act or under an agreement us/ 90 whichever is more beneficial to the NRI (Bank in our case)

So now what matters here is rate specified in Finance act.

If Finance Act specify any lower rate then 10% then that Lower rate will be applicable.

Regards

Madhusudan

Agree with Navin.

DTAA always override Income Tax provision.

And my view is that whenever there is any doubt of 'deduction of TDS' it is advisable to deduct it to avoid the future disputes as per the applicable rates with PAN or without PAN.

DTAA always override Income Tax provision,

Yes,

As per the provisions of the Section 90(2) of the Act, in case of a non-resident eligible for tax treaty,  provisions of the Section 90(2) of the Act or  provisions of the tax treaty whichever is beneficial to the  assessee are applicable.

However,provision of sec 206AA overdide the provisions of Sec 90 and provision of DTAA

 T he Section 206AA mandates furnishing of PAN by the recipient of  income to the deductor. There is no special exclusion carved out for a non-resident recipient, even if the non-resident is not otherwise obliged to apply for and obtain PAN.

Mr Navin Jainis right since Sec 195 itself says that if a Resident Pays any interest to any foreign Company or non resident TDS is to be deducted at the rates in force.

since malaysian will not have PAN no. in India TDS is to be deducted @ 20% + E.Cess(3%)

Thanks a lot to all of you for prompt and detailed reply...

I have gone thru all the replies / comments and as per DTAA between India and Maurisious found that clause 3 of article 11 says 

3. Interest arising in a Contractng State shall be exempt from tax in that State provided it is derived and beneficially owned by

(c) and bank carrying on a bona fide banking business which is a resident of the other Contracting State.

In view of the above clause my opinion is that there would be no Tds on this interest payment.

Regards

Lekhraj