23 July 2010
Dear Experts, Technical Fees paid to director of a company who is foreign national. Also service tax has been deducted. My doubts are 1) While calculating the Technical Fees should we also add the Service Tax paid? 2) If yes while calculating TDS we should also include Service tax. (i.e. TDS has to be deducted inclusive of the Service Tax bill) 3) There is DTAA with the country, therefore normal provisions or DTAA whichever is lower has to be applied? 4) We are filing the Director's Return in India too...so while calculating Income from Business of that Director should i have to take the amount inclusive of the Service Tax or Net of Service Tax. Thanks for all the experts who guide me in this issue. It is highly appreciated. PLEASE PROVIDE ME WITH THE RELEVANT SECTIONS WHEREVER APPLICABLE. With Regards, Rajesh.
23 July 2010
CBEC has clarified that the relationship between director and company is tat of employee and employer which is distinct from serfvice provider-service receiver. so no service tax on those technical fees paid to directors
Since service tax is not paid there is no ques of deduction with service tax
If DTAA provides for lower deduction of tax, then the provision of DTAA prevails over IT Act
No service tax/..... So ques invalid.
In case service tax is applicable it is always better to show the amount inclusive of service tax and claim service tax as deduction. anyway this is not applicable here
23 July 2010
IF DIRECTOR IS GETTING TECHINCAL FEE AS A PROFESSIONAL AND HE IS SHOWING ITS IN BUSINESS INCOME AND HE HAS A PROFESSIOANL QUALIFICATION DUE TO WHICH HE IS GETTING SUCH TECH. FEE. THEN SERVICE TAX WILL BE PAID ON SUCH TECHINAL FEES. TDS WILL BE DEDUCTED ON TOTAL INCLUSIVE OF SERVICE TAX. IF SUCH PERSON HAS PAN NO, THEN TDS RATE AND DTAA RATE WHICH IS LOWER WILL BE APPLICABLE.
If the PAN is not provided to the Indian party, then the Indian party is required to deduct tax on the foreign payment at the highest of the following rates:
1. at the rate specified in the Income Tax Act, 1961 2. at the rates in force (rate specified in the Finance Act or under the double tax treaty) 3. at 20%
IF YOU ARE FILING RETURN OF SUCH PERSON IN INDIA TOO, THEN HIS YOU HAVE TO TAKEN INCOME EXCLUSIVE OF SERVICE TAX WHICH HE HAS RECEIVED.
CAclubindia
