A Company registered and having registered office in India wants to make a payment of Professional Fees to a party in USA. The party of USA hasn't furnished PAN. What is the rate at which TDS is to be deducted?
18 February 2014
The payment being made by the company to the USA falls within the ambit of chargebility since it is a payment for technical services as covered in explanation 2 to clause (vii) of sub-section (1) of section 9 of Income tax act.
extract of section 9 for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services. So it convers professional fees also.
Now we have to see the tax or tds rate.
for which we have to see the rate in income tax act and rate mentioned in DTAA between india and USA for such transaction, because the non resident has been given the right to choose the rate that is more beneficial to him or technically whichever rate is lower.
Section 195 of income tax act talks about the tax to be deducted at source on payments being made to non residents which says deduct income-tax thereon at the rates in force which is business tax rate for foreign company which is 40%.
Now, as per the clauses of Indo-US DTAA, payments for professional/legal services are covered in Article 15.
Please go on income tax site and go on DTAA section and check the DTAA article 15 between india and USA , i think rate is around 15% or so. Please check and deduct TDS on that rate.
18 February 2014
whatever rate is beneficial to non resident so even if he does not furnish PAN he has right to take get his TDS deducted on lowest rate between rate as per income tax act and rate as per DTAA..
CAclubindia
