TDS on payment to a non resident

Dear Experts

Is withholding tax required under section 393 (previously section 195) on payment to a non resident for purchase of an item which is treated as fixed asset in books of the indian company?

Regards

CA Dipjyoti Majumdar

Replies (1)

Where the transaction is a straightforward purchase of a physical item or capital equipment from a non-resident:

  • The non-resident generally earns business income or trading profit.

  • If the non-resident has no permanent establishment, business connection, fixed place, dependent agent, or other taxable presence in India, that profit is ordinarily not taxable in India.

  • Therefore, section 393(2) withholding should generally not apply.

  • The fact that the Indian buyer capitalises the item and claims depreciation is not decisive.

  • This conclusion is based on the chargeability principle under section 393(2); it is not a blanket exemption for every capital-asset purchase.

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