15ca & 15cb in case of grant of 100% dit relief certificate

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Mehul Gohel (Querist)
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24 July 2015 Respected Sir
Thanks In Advance,

I Have one Doubt...

Out client is in the business ofexporting of sweet Biscuits.

We require to Pay Freight charges to Indian agency of Foreign shipping company in USD by way of transfer of amount in indian bank branch of Foreign Bank ( account of indian company ).

The shipping company has produced Grant of 100% DIT relief certificate. The vessels from which products are exported is clearly mentioned in same certificate.

Whether we required to deduct TDS from the freight charges ?

If No, then what other documents that we must demand from client.

If yes then in which section 194C or 195 ?
as the payment are made in the account of indian Pvt. ltd. comapny ( i.e. agency of foreign company)

Thanks once again in advance.

Mehul Gohel

Mehul Gohel (Querist)
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27 July 2015 any one ????

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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14 July 2024 In your scenario where you are paying freight charges to an Indian agency of a foreign shipping company, here are the considerations regarding TDS (Tax Deducted at Source) and necessary documentation:

### TDS on Freight Charges:

1. **Applicability of TDS:**
- Generally, under Section 194C of the Income Tax Act, 1961, TDS is applicable on payments made to contractors or sub-contractors for carrying out any work (including transportation of goods). However, if the payment is made to a non-resident, Section 195 applies instead of Section 194C.

2. **Nature of Payment and Section 195:**
- Payments made to non-residents (which includes foreign companies) are covered under Section 195 for TDS purposes.
- Since you are paying freight charges to an Indian agency of a foreign shipping company, the payment is effectively being made to a non-resident (the foreign shipping company). Therefore, TDS provisions under Section 195 would typically apply.

3. **DIT Relief Certificate:**
- If the foreign shipping company has provided a certificate granting 100% relief under the Double Taxation Avoidance Agreement (DTAA) or under Section 90/90A of the Income Tax Act, this certificate essentially states that the income is exempt from tax in India or subject to a lower rate of tax. This is crucial because it may exempt you from deducting TDS or may allow for TDS at a reduced rate.

4. **Documentation Required:**
- **Grant of 100% DIT Relief Certificate:** Ensure you have a copy of this certificate provided by the foreign shipping company. This certificate should specify the nature of income (freight charges), the vessels involved, and the relief granted under the DTAA.
- **Invoice and Agreement:** Obtain invoices and agreements detailing the freight charges, terms of transportation, and any other relevant contractual terms.
- **Proof of Payment:** Keep records of the actual payment made to the Indian agency of the foreign shipping company.

### Action Steps:

- **Review the DIT Relief Certificate:** Verify that the certificate specifically covers the type of payment you are making (freight charges) and the vessels involved.
- **Consult with a Tax Advisor:** Given the specific nature of tax treaties and exemptions, it’s advisable to consult with a Chartered Accountant or tax advisor who can interpret the DIT Relief Certificate and guide you on compliance with TDS provisions.
- **File Form 15CA/15CB if applicable:** Depending on the interpretation of the DIT Relief Certificate and the applicability of TDS, you may need to file Form 15CA/15CB to certify that tax is not deductible or is deductible at a lower rate.

In summary, while the freight charges paid to the Indian agency of a foreign shipping company generally attract TDS under Section 195, the presence of a DIT Relief Certificate can exempt or reduce the TDS liability. Ensure you have the necessary documentation and seek professional advice to comply with tax laws accurately.

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