Payment to Non Residence without pan

This query is : Open

CA krishna Kamthe (Querist)
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04 June 2010 If we make payment to NON residence Not Holding Pan and Grossup of TDS is there then i got fallowing Way by expert Please Comment on it
If Payment Need to Make is RS 100000
Tds under Income Tax Act/DTAA-10%

Grossup Amount=100000*100/90=111111.11
TDS will be 20%=111111.11*20%=22222.22
Now what should Book as expencess
a)Rs 111111.11 or
b)100000+22222.22=122222.22

CA krishna Kamthe

CA krishna Kamthe (Querist)
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04 June 2010 And one more For Import of service What Amount to take a or b for reverse charge.

kantijain

kantijain (Expert)
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04 June 2010 Dear Krishna,

Firstly let us determine appropriate TDS rate:

u/s 195(Payment to non-resident) read with section 206AA (where PAN is not furnished for payment made after 1.4.2010) is relevant to determine the TDS rate.

As per info provided by u, tds rate under the act/dtaa is 10%;
however sec 206AA prescribes higher of the following rate:
a)rate as per act; (in ur case 10%)
b)rate in force;(in ur case 10%)
c)20% rate
Since 20% is higher the same will be applicable.

Secondly let us do the grossing up as prescribed in 195A:

a) Grossup Amount=100000*100/80=125000

b) TDS will be 20%=125000*20%=25000

c) Net amt=100000 (a-b)

ur expense will be Rs.125000 (payment to non-resident + TDS borne by firm for that payment).

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CA krishna Kamthe

CA krishna Kamthe (Querist)
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07 June 2010 Dear Kantijain
Thanks for reply
Under section 195 A rate is given as 'rate in force' and as per section 2(37A)(iii)
rate in force will be
for the purposes of deduction of tax under section 195, the rate or rats of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in an agreement entered into by the Central Government under section 90, whichever is applicable by virtue of the provisions of section 90;
It means for the purpose of grossing up , either the rate given by the Finance Act or the rate specified in DTAA whichever lower is applicable. Nowhere section 194A required for the purpose of grossing up the rate given by section 206AA i e 20% is required.