Payment of commission to overseas agent

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Vivek V. Mangoli (Querist)
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02 June 2009 We have engaged services of overseas company for assisting us in procuring machinery from overseas manufacturer. We have to pay commission to this agent. Pl. let me know the procedures to be followed by us under FEMA and I Tax Act.

Tks in adv.

Vivek Mangoli

taxindiaconnect

taxindiaconnect (Expert)
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02 June 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.

Since as per section 9 the income of a resident by way of fees for service for procuring the machinery would be treated as technical fees and will be deemed to accrue and arise in India, the income will be taxable in India with in the meaning of deeming provision under section 9 of the Act as the explanation 2 to section 9 (1) (vii)

However As per section 90 of IT Act one can take the benefit of provision of Double taxation Avoidance Agreements ( DTAA) on the payment of royalty if the recipient of the income from technical fees is a resident of a country with whom India has a DTAA. Currently India has DTAA’s with more then 75 Countries.

While making payment you need to obtain a certificate from a chartered accountant and then remit the amount. As per amended TDS laws, you need to file such certificate to income tax department before remitting the amount and also need to file TDS returns.

Hope this clarifies your query with regard to Tax Procedure.