09 May 2009
My client in USA a foreign national (Indian by birth)intends to provide consultancy service to his Indian client. He does not have any office in India. He bills from US and his clients makes payment to his account in US Dollar against the bill. His client says he has to deduct TDS on the amount payable. 1. Is TDS applicable in this case?? 2. If deducted how can the same be claimed from I Tax Deptt.as he does not have any PAN in India? 3. Does he need to pay further tax on the billed amount? 4. Is service tax also applicable in this case?
09 May 2009
You need to clarify that what kind of services are being provided. However in the absence of the nature of services I am presuming it to be the services in the nature of consulting and professional. As per article 12 of Double Taxation avoidance Agreement ( DTAA or treaty ) between India and USA, a payment for included services are taxable in other contracting state only if such service make available any technical knowledge to the payer os such services in other contracting state. Thus in this case we have presumed that the service are ordinary service of consulting. The simple consulting services do not make technical knowledge to the payer, hence no TDS is applicable. For example the legal services do not provide any technical skill to the payer to make him competent to start services of his own, while a technical information regarding a software may permit the payer to start the business of his own in India using that information. In such cases the tax would deductible. The short answers to all your queries is as under. .
1) The services are not covered under the definition of technical services with the meaning of article 12 of DTAA between India and USA. 2) No deduction required. This query is not applicable. 3) Not applicable 4) Service tax is applicable as the service provided outside India but consumed in India.
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