03 July 2009
Our company want to make payment to commission agent against export and he is non resident. please confirm if DTAA is not cover the TDS on export commission then section 195 is applicable or not?
03 July 2009
Section 195 of the Act casts an obligation on an resident tax payer making payment to a non resident in respect of an income taxable in India to withhold tax at the rates applicable.
As per section 9 the income of a resident by way of commission is not treated to deemed to accrue and arise in India, the income will not be taxable in India. Thus on sales commission income of non residents no TDS is required to be deducted. CBDT has also issues a circular on this in the year 2005. The text of the same is reproduced here under for your ready reference
Non-resident agent operating outside the country - As clarified earlier in Circular No. 23, dated 23-7-1969 (see under section 5), where the non-resident agent operates outside the country, no part of his income arises in India, and since the payment is usually remitted directly abroad, it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore, held to be not taxable in India. This clarification still prevails, in view of the fact that the relevant sections [section 5(2) and section 9] have not undergone any change in this regard. No tax is therefore deductible under section 195 from export commission and other related charges payable to such a non-resident for services rendered outside India.—Circular : No. 786, dated 7-2-2000.
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