TDS on payment to Company not in India

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 October 2010 In case payment is made to company in china for professional services then witholding tax to be dedcted 10% or 20% as pan is not avaialable

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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11 October 2010 206AA. Requirement to furnish Permanent Account number

Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

Querist : Anonymous

Querist : Anonymous (Querist)

11 October 2010 Thanks...But how any section can overule tax treaty?

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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11 October 2010 https://www.caclubindia.com/forum/recent-applicability-of-pan-to-foriegn-co-for-tds-u-s-195-83410.asp

Please see this link.

taxindiaconnect

taxindiaconnect (Expert)
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11 October 2010 Dear all experts, an interesting discussion. I would like to add that The Provisions of section 206AA which has brought this change in the IT Act relating to PAN starts with a non obstinate clause as following -

“Nothwithstanding anything contained in any other provision of this Act ………..,”

This mean the provision of section 206AA override all the provisions of the income tax Act 1961 including section 90 which provides that in case of a non resident the tax rates as per DTAA or IT Act which are more beneficial shall apply is also overridden. This in your query tax rate @ 20% shall apply if PAN is not available. Where as the question is that all foreign companies will not apply for PAN and will try to pay withholding tax @ 20% even where the rate of tax is higher. The Draftsman have taken enough care of this aspect also as the section provides that in such situations TDS @ 20 % or applicable rate as per IT Act, would apply.

Hope this throws some clarity on the issue.