It refund of foreign company

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Mahender Jain (Querist)
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16 October 2012 Their is a foreign company which provide service to indian company and indian company deduct TDS at excess rate. so now their is refund arising for foreign company. Now i wana to know, how foreign company claim refund from IT dept (foreign company also doesnot have any bank account in India)
Can foreign company take Tax credit while filling their return in their company agt refund amount

Manish Soni

Manish Soni (Expert)
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16 October 2012 Hi Mahender,

It depends upon the DTAA of India with that country. In majority cases, foreign companies not filing ITR in India can claim benefit of withholding tax in their respective country and hence it can utilise the TDS deducted by Indian party.

Let me know if you need further clarification

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Mahender Jain

Mahender Jain (Querist)
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16 October 2012 Dear Mr Manish
Thanks for your rply
company fall in DTAA with Japan and according to this, that foreign company also have to file return in India too for respective income from india
So in this case While filling ITR in India, their is Refund will come in to Foreign company as TDS deducted in excess by indian company. So now how foreign company will claim this refund amount. and also in refund case, Bank MICR code is mandatory but foreign company does not have any Bank Account in India

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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02 August 2024 When a foreign company is entitled to a refund of excess TDS deducted by an Indian company, the process to claim this refund involves several steps. Here’s a detailed guide on how the foreign company can claim the refund from the Income Tax Department of India:

### Steps for a Foreign Company to Claim a Refund

1. **File Income Tax Return in India:**
- **Filing Requirement:** The foreign company must file an Income Tax Return (ITR) in India for the relevant Assessment Year (AY) where the income was earned and TDS was deducted. This is required to claim a refund.
- **Form to Use:** Typically, foreign companies use **ITR-7** for filing their return, as it is meant for persons including companies who need to file a return under section 139(4A) of the Income Tax Act, 1961.

2. **Prepare and Submit the Tax Return:**
- **Include TDS Details:** Ensure that the return includes details of the TDS deducted, as reflected in the Form 26AS.
- **Claim Refund:** The return should reflect the excess TDS as a credit, and the foreign company should claim a refund for the excess amount.
- **Bank Details:** Although the company does not have an Indian bank account, it still needs to provide bank details. In the absence of an Indian bank account, the company can request the refund to be processed in the same manner as other refunds, which typically would be via an international remittance.

3. **No Indian Bank Account:**
- **Bank MICR Code:** The MICR code is generally required for Indian bank accounts, but if the foreign company does not have an Indian bank account, it should communicate this to the Income Tax Department and follow their instructions for an alternative method of refund processing.
- **Refund Process:** Refunds for foreign entities can be processed through international remittance or other mechanisms as decided by the Income Tax Department. The foreign company may need to coordinate with the Income Tax Department to ensure the refund is processed correctly.

4. **Correspondence with the Income Tax Department:**
- **Letter to Assessing Officer:** A formal letter explaining the situation, including details about the excess TDS and the lack of an Indian bank account, should be sent to the jurisdictional Assessing Officer (AO) along with the filed return.
- **Alternative Arrangement:** The company should request an alternative arrangement for receiving the refund.

5. **Claim Tax Credit in Japan:**
- **Double Taxation Avoidance Agreement (DTAA):** Under the DTAA between India and Japan, the foreign company can claim a tax credit for the TDS deducted in India in its Japanese tax return. This ensures that the income is not taxed twice.
- **Documentation:** The company should keep records of the TDS certificate (Form 16A) and any communication with the Income Tax Department in India for claiming the credit in Japan.

### Summary of Actions:

1. **File ITR in India:** Use ITR-7 and include TDS details.
2. **Bank Details:** Provide details and request alternative refund processing if no Indian bank account.
3. **Contact Income Tax Department:** Send a letter explaining the situation to the jurisdictional AO.
4. **Claim Tax Credit in Japan:** Use the DTAA provisions to claim a credit in the Japanese tax return.

By following these steps, the foreign company should be able to claim the refund for the excess TDS deducted in India and handle the refund process appropriately even without an Indian bank account.