10 July 2009
Dear Jitender I agree with you on the payment made to a non residents in general but not in this case in specific. 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. The tax is not required to be deducted from the payments made outside India to a NR if the income of NR is not taxable in India. The income of the NR is taxable in India if it satisfies certain conditions. As per section 5 the income of NR should have been either be received or deemed to be received in India or should be accrue or deemed to accrue in india for such income to be taxable in India. Section 9 certain income of a non resident would be treated as deemed to accrue and arise in India irrespective of where ever provided. Thhe service of advertisement, the advertisement which is provided outside India does not accrue or arise or deemed to accrue and arise in India as per section 5 or 9 of the IT Act. Thus is not taxable here in India. Since the Income is not taxable in India, No TDS is required to be deducted from such payments. Section 194C is applicable to payment made for advertisement service in India, is not applicable to a non resident. Hope this clarifies the issue. In case you need any further clarification, please do let me know.
CAclubindia
