28 June 2011
Circular No 786 dated 07.02.2000 states that the commission paid to non resident agent is not taxable in India and hence no tax is to be deducted.
Fees is for techincal service(FTS) payable to NRI agent is taxable in India.
If commission and FTS is payable to the same NRI agent, can we make two payments as follows: Payment for FTS after TDS Payement for Commission without TDS
28 June 2011
The Central Board of Direct Taxes had issued Circular No. 23 on 23-7-1969 regarding taxability of income accruing or arising through, or from, business connection in India to a non-resident, under section 9 of the Income-tax Act, 1961. 2. It is noticed that interpretation of the Circular by some of the taxpayers to claim relief is not in accordance with the provisions of section 9 of the Income-tax Act, 1961 or the intention behind the issuance of the Circular. 3. Accordingly, the Central Board of Direct Taxes withdraws Circular No. 23 dt. 23-7-1969 with immediate effect. 4. Even when the Circular was in force, the Income-tax Department has argued in appeals, references and petitions that- (i) the Circular does not actually apply to a particular case, or (ii) that the Circular can not be interpreted to allow relief to the taxpayer which is not in accordance with the provisions of section 9 of the Income-tax Act or with the intention behind the issue of the Circular. It is clarified that the withdrawal of the Circular will in no way prejudice the aforesaid arguments which the Income-tax Department has taken, or may take, in any appeal, reference or petition. 5. The Central Board of Direct Taxes also withdraws Circulars No. 163, dated 29-5-1975 and No. 786, dated 7-2-2000 which provided clarification in respect of certain provisions of Circular No 23, dated 23-7-1969.—Vide Circular No. 7/2009 [F. No. 500/135/2007-FTD-I], dt. 22-10-2009. THEREFORE CIRCULAR NO 786 STANDS WOITHDRAWN AS OF NOW PL DO NOT TAKE ANY DECISION ON BASIS OF ABOVE CIRCULAR TAXABILITY OF COMM IN INDIA DEPENDS UPON MANY FACTORS PLEASE ELABORATE UR QUERY
CA MANOJ GUPTA JODHPUR 09828510543 gm2104@gmail.com
As requested to elborate, my clients has many agents in foreign countries working independently on commission basis. If any sale is effected by the agent, then a commission of x% is paid by my client to thieir agent.
I wanted to undertstand if the Commission to the Foreign Agents should be paid with or without deduction of taxes in India.
30 June 2011
The answer shall depend on the exact services performed by the agents outside India. If they are purely in nature of selling agent services then there shall be no TDS but you need to thoroughly check the agreement to see whether any services fall within the meaning of Fee for technical Services sec. 9(1)(vii)of Income Tax Act,1961.
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