Indian compay having a subsidiary in us

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2019 if an indian company wants to open subsidiary in US with paid up capital 100 thousands $

and for the above purpose it hires a US consultant a in US with charges of 200 $

what sort of tax implication/ compliance or what are the procedure to pay his (US consultant) charges

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 January 2019 No tax or TDS applicable on this payment. Contact your bankers with invoice and letter of awarding the work the bank will guide you for remittance.

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2019 Sir ,
can you please provide me a source/ link where I can go through the provision for the same.

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Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2019 Sir , can you please provide me a source/ link where I can go through the provision for the same.

SHUBHAM SHARMA

SHUBHAM SHARMA (Expert)
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16 January 2019 Whether the services are with respect to project viability? This is with reference to GST implications?
Thanks And regards
CA Shubham Sharma
Contact-9462302922
Email-shubham.vnv@gmail.com

Querist : Anonymous

Querist : Anonymous (Querist)

16 January 2019 Thanks,
I am very well versed with the GST implication
but I want to know what sort of tax implication/ compliance in respect of income tax / TDS or through what procedure/ mechanism consultant (US consultant) charges cab be paid.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 When dealing with tax implications related to payments to US consultants for services rendered, there are several considerations under Indian income tax laws, particularly regarding TDS (Tax Deducted at Source) and compliance. Here's a breakdown of the process and implications:

### 1. **Tax Implications and Compliance:**

#### **1.1. **Payment to Foreign Consultants:**
- **Nature of Services:** Determine whether the services provided by the US consultant fall under technical services, professional services, or other categories as per the Income Tax Act, 1961, and the Double Taxation Avoidance Agreement (DTAA) between India and the US.

- **DTAA Considerations:** The tax treatment depends on the DTAA provisions between India and the US. Typically, fees for technical services might be subject to withholding tax.

#### **1.2. **TDS on Payments to Non-Residents:**
- **Rate of TDS:** As per the Indian Income Tax Act, TDS is required to be deducted at the rates prescribed under Section 195. For payments to non-residents, including consultants, the TDS rate is usually 40% plus applicable surcharge and cess, unless a lower rate is prescribed under the DTAA.

- **DTAA Benefits:** If the US consultant claims the benefit of DTAA, the rate of TDS might be lower. You would need to obtain a Tax Residency Certificate (TRC) from the consultant to apply for the lower rate.

#### **1.3. **TDS Compliance Procedure:**
- **Obtain TRC:** Request a Tax Residency Certificate (TRC) from the US consultant to claim benefits under the DTAA.

- **Issue Form 15CA/15CB:** Before making payment, you need to file Form 15CA online on the Income Tax Department's website and obtain a certificate in Form 15CB from a Chartered Accountant, confirming the details of the payment and applicable TDS rate.

- **Payment of TDS:** Deduct TDS as per the applicable rate and deposit it to the government treasury using Challan 281.

- **Filing TDS Returns:** File quarterly TDS returns in Form 27Q, reporting the details of the payment and TDS deducted.

#### **1.4. **Documentary Requirements:**
- **Invoice and Agreements:** Ensure you have the consultant’s invoice and any service agreements in place.

- **Tax Residency Certificate:** Obtain a TRC from the consultant to avail of the benefits under DTAA.

- **Form 15CA/15CB:** Ensure these forms are duly filled and submitted.

### 2. **Payment Mechanism:**

#### **2.1. **Payment to US Consultant:**
- **Bank Transfer:** Payments to the US consultant are generally made through international wire transfers. Ensure that the bank or financial institution handles the conversion and transfer in compliance with foreign exchange regulations.

- **Currency Consideration:** Payments can be made in USD or INR. The choice of currency may affect the conversion rate and corresponding TDS calculation.

### 3. **Tax Reporting and Filing:**

#### **3.1. **Reporting Requirements:**
- **Income Tax Returns:** Ensure that the TDS deducted is correctly reflected in the company's income tax returns.

- **Form 27Q Filing:** This form should be filed on a quarterly basis to report the TDS deducted and deposited.

### Summary:

1. **TDS Deduction:** Deduct TDS at the applicable rate as per the Income Tax Act and DTAA provisions. Obtain a Tax Residency Certificate (TRC) from the consultant if a lower rate under DTAA is applicable.

2. **Form 15CA/15CB:** File Form 15CA and obtain Form 15CB before making the payment.

3. **Compliance:** Ensure proper documentation, including invoices, agreements, and TRC. File quarterly TDS returns and include the TDS in the company's income tax filings.

4. **Payment Mechanism:** Payments are typically made via international bank transfer, and ensure compliance with foreign exchange regulations.

For precise guidance and to ensure compliance with the latest regulations, consulting with a tax professional or accountant is recommended.