18 October 2012
Querry 1: Can payment under a contract be made in home currency while the contract value is in foreign currency and the services under the contract is provided at foreign soil.
Querry 2: If the above payment can be in home currency the what are the tax issues needs to be addressed at Home soil as well as Foreign soil.
19 October 2012
There is no restriction under the income tax regarding the payment in Foreign Currency in India, where the services are rendered outside India.
In your case , if the payment is made in India, then if the payment is for Technical or Professional/consultancy work , then TDS would be attracted at the rate of 10 % under sec. 194 C, if the payee has PAN in India. If the payee does not have PAN , then TDS will be attracted at the rate of 20%.
In case the payment is made outside India, services are rendered outside India and also the payee does not have any Permanent Establishment in India nor the payee is resident in India, then probably there would not be any TDS as the provisions of DTAA entered into by India with various countries provides for Nil tds in such cases.
20 October 2012
I pre assume that contract is between a R & NR. My views: a. Currency does not effect in any way TDS. b. TDS shall be applicable as u/s 195. c. DTAA benefits can be availed. But in case of FTS most treaties will levy TDS.
26 October 2012
Both the dedutor and deductee are resident in India. The contract is in USD and the contract is executed by deductee's branch office situated outside India. As per my view 194C will attract in this case as this is purly a construction related contract.
But can the TDS be deducted in foreign currency and then remited to exchequer by converting the same at the rate in force at that time?
Further if contractor wants to take the payment in INR by converting the foreign currency. Is it possible to pay them in INR after deducting TDS in INR instead of USD?
CAclubindia
