As per Sec 172 of Income Tax Act, in case of payment to Non resident carrying on Shipping Business, if Goods are shipped at Indian Port then 7.5% of freight amt is treated as Income accruing In India. and acc liable to tds. But in Case we Import goods from outside and for that we pay freight to Non resident(Shipping Busi), then whetehr TDs applicable? If yes under which section?
Regards, Varsha
Above Query for posted by me 2-3 days before..But no replies received yet...Pls try to resolve my query..
20 November 2009
You do not have to deduct TDS of 7.5% for export cargo. The agent of the ship is issuing a guarantee on behalf of the master before the ship docks that all the income tax liability will be cleared. Based on the tonnage and revenue he discharges the liability and then only the ship can leave the port. Your TDS certificate will take too much time for him to prove his payment and he will have expenses of over 1 crore per day for being stuck at the port. Therefore TDS as per other sections of the Act do not apply where Sec 172 has been applied.
For your imports, the income from shipping business is not arising from any business of the shipping line in India. Even though they have a BOPE or DAPE, for cargo that is loaded abroad, the income arises abroad only. No portion of that income is arising on account of the agent in India or their branch in India. Therefore there is no TDS when you pay the freight to the non resident for imports. Even our Indian shipping companies are taxed abroad as per their laws when they carry the cargo from those ports. The method is normally the same everywhere.
What I have elaborated on above is only for payments of FREIGHT/FARE for carriage of goods / passengers by sea.
If you pay to Indian shipping company you have to deduct u/s 194C.
For a Non Resident Freight Forwarder, you have to deduct u/s 195 even though he is issuing you a Forwarders B/L. He is not in the shipping business as he just arranges a good rate by means of service contract with shipping line. Therefore you will realise that many of these International Freight Forwarders having world wide operations get themselves registered as NVOC (Non Vessel Operating Carriers). They do not own or charter vessels but are able to issue ocean bills of lading and therefore Section 172 applies to them. The ship agent handling the ship ensures that liabilities u/s 172 are discharged by them. What they have usually is a slot charter on the ship for a limited number of containers.
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