Payment to Non Resident
This query is : Resolved
26 February 2011
Dear Sir
Company have paid 4596 USD dollars to Vendor ( Non Resident ) by Credit Card of Director for the following:
1.3096 USD Dollar for AMC of Software
2.1500 USD Dollar for Purchase of Software
Procedure u/s 195(6)have to be followed before Remittance.But we have remitted the Gross amount to Non Resident without Deducting Tax .
Please Suggest us what we have to do now( Apart from TDS dEDUCTION) so that we can comply with Income Tax Act.
ie Procedure u/s 195(6) can be followed or not after remittance.
If Not what are the options available for compliance of Income Tax Act?
Thanks in advance
Thanks
Sanjeev Jain
Company have paid 4596 USD dollars to Vendor ( Non Resident ) by Credit Card of Director for the following:
1.3096 USD Dollar for AMC of Software
2.1500 USD Dollar for Purchase of Software
Procedure u/s 195(6)have to be followed before Remittance.But we have remitted the Gross amount to Non Resident without Deducting Tax .
Please Suggest us what we have to do now( Apart from TDS dEDUCTION) so that we can comply with Income Tax Act.
ie Procedure u/s 195(6) can be followed or not after remittance.
If Not what are the options available for compliance of Income Tax Act?
Thanks in advance
Thanks
Sanjeev Jain
28 February 2011
TDS @ 20% ought to have been deducted for both the payments assuming the foreign party doesn't have PAN.
Better to pay tax from own pocket or not claim the expenses in the books of the company(but that shall also not absolve the director from non compliance of TDS provisions)
Better to pay tax from own pocket or not claim the expenses in the books of the company(but that shall also not absolve the director from non compliance of TDS provisions)
Message likes :
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04 March 2011
Dear Sir
Please reply as per modified Query ?
Please reply as per modified Query ?
09 August 2024
When a company in India makes payments to a non-resident, especially for services or purchase of software, it is crucial to ensure compliance with the tax regulations under Section 195 of the Income Tax Act. Here’s how you can handle the situation given that the payment has already been made:
### **Steps to Take After Remittance**
1. **Understand the Situation:**
- **Section 195 Compliance:** Section 195 of the Income Tax Act requires that tax be deducted at source (TDS) on payments made to non-residents. This applies to payments such as royalties, technical services, and other income, including software purchases and annual maintenance contracts (AMCs).
2. **Procedure Under Section 195(6):**
- **Form 15CA and 15CB:** These forms are required to be filed when making payments to non-residents to ensure that the tax obligations are met. Form 15CA is a declaration of remittance, while Form 15CB is a certificate provided by a Chartered Accountant verifying the tax compliance related to the remittance.
- **Post Remittance Procedure:** If the payment has already been made without TDS deduction and compliance with Form 15CA and 15CB, you need to follow a rectification process.
### **Rectification and Compliance Options**
1. **File Forms 15CA and 15CB (Retrospectively):**
- **Form 15CA:** This form should be filed online with the Income Tax Department. It includes details of the remittance and the applicable tax. Since the payment was made without TDS, the form should reflect this situation.
- **Form 15CB:** A Chartered Accountant should certify this form, verifying the details and tax implications related to the remittance.
2. **Inform the Tax Authorities:**
- **Tax Payment:** You need to pay the tax due on the amount remitted. This involves calculating the TDS that should have been deducted and paying it directly to the government.
- **Interest and Penalty:** Be prepared to pay interest and possible penalties for late payment or non-compliance.
3. **Rectify the TDS Details:**
- **File a Rectification Request:** After paying the TDS and filing the required forms, you may need to file a rectification request if there are discrepancies or if the payment has been recorded incorrectly in the TDS records.
4. **Seek Professional Advice:**
- **Consult a Tax Advisor:** Given the complexity of compliance and rectification, it’s highly advisable to consult with a tax advisor or a Chartered Accountant. They can guide you through the process of rectification and ensure that all regulatory requirements are met.
### **Summary**
- **Immediate Actions:**
- **Calculate and Pay TDS:** Determine the tax that should have been deducted and pay it to the government.
- **File Form 15CA and 15CB:** Submit these forms online, reflecting the actual details of the payment and tax implications.
- **Rectification:**
- **File a Rectification Request:** If necessary, file a request to correct any errors in the TDS records.
- **Professional Guidance:**
- **Consult Experts:** Work with a tax advisor to ensure all compliance issues are addressed.
By following these steps, you can rectify the non-compliance and ensure adherence to the Income Tax Act.
### **Steps to Take After Remittance**
1. **Understand the Situation:**
- **Section 195 Compliance:** Section 195 of the Income Tax Act requires that tax be deducted at source (TDS) on payments made to non-residents. This applies to payments such as royalties, technical services, and other income, including software purchases and annual maintenance contracts (AMCs).
2. **Procedure Under Section 195(6):**
- **Form 15CA and 15CB:** These forms are required to be filed when making payments to non-residents to ensure that the tax obligations are met. Form 15CA is a declaration of remittance, while Form 15CB is a certificate provided by a Chartered Accountant verifying the tax compliance related to the remittance.
- **Post Remittance Procedure:** If the payment has already been made without TDS deduction and compliance with Form 15CA and 15CB, you need to follow a rectification process.
### **Rectification and Compliance Options**
1. **File Forms 15CA and 15CB (Retrospectively):**
- **Form 15CA:** This form should be filed online with the Income Tax Department. It includes details of the remittance and the applicable tax. Since the payment was made without TDS, the form should reflect this situation.
- **Form 15CB:** A Chartered Accountant should certify this form, verifying the details and tax implications related to the remittance.
2. **Inform the Tax Authorities:**
- **Tax Payment:** You need to pay the tax due on the amount remitted. This involves calculating the TDS that should have been deducted and paying it directly to the government.
- **Interest and Penalty:** Be prepared to pay interest and possible penalties for late payment or non-compliance.
3. **Rectify the TDS Details:**
- **File a Rectification Request:** After paying the TDS and filing the required forms, you may need to file a rectification request if there are discrepancies or if the payment has been recorded incorrectly in the TDS records.
4. **Seek Professional Advice:**
- **Consult a Tax Advisor:** Given the complexity of compliance and rectification, it’s highly advisable to consult with a tax advisor or a Chartered Accountant. They can guide you through the process of rectification and ensure that all regulatory requirements are met.
### **Summary**
- **Immediate Actions:**
- **Calculate and Pay TDS:** Determine the tax that should have been deducted and pay it to the government.
- **File Form 15CA and 15CB:** Submit these forms online, reflecting the actual details of the payment and tax implications.
- **Rectification:**
- **File a Rectification Request:** If necessary, file a request to correct any errors in the TDS records.
- **Professional Guidance:**
- **Consult Experts:** Work with a tax advisor to ensure all compliance issues are addressed.
By following these steps, you can rectify the non-compliance and ensure adherence to the Income Tax Act.
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