tax
This query is : Resolved
04 December 2010
We have received bill from France, Professional & technical charges,
pls suggest us, for tds rate & section, if the contract is foregin consultant / lawyer /Contractors with foreign company & thereafter foreign company (our parents company) reimbursed to Indian company than what is the effect of tds rate
pls suggest us, for tds rate & section, if the contract is foregin consultant / lawyer /Contractors with foreign company & thereafter foreign company (our parents company) reimbursed to Indian company than what is the effect of tds rate
05 December 2010
In case services are in the nature of Fee for Technical services and make available technical knowledge/ skill know how to the payer, as per Article 13(4), Payments of any kind to any person, other than payments to an employee of the person making the payments and to any individual for independent personal services mentioned in Article 15, in consideration for services of a managerial, technical or consultancy nature.
Accordingly, the rate of FTS is 10% as per India-France DTAA as against rate of 10.5575% prescribed under the provisions of Income-tax Act, 1961, being more beneficial to the assessee.
In case service does not make available knowledge/ skills etc, protocol to India-france DTAA provides that If subsequent to signing of the DTAA with France, India enters into a treaty with a member of OECD, which limits the scope and rate of taxation of FTS, such lower rate and scope shall apply to India - France DTAA as well.
India has executed DTAA with USA which has entered into force on December 18, 1990 and with Germany which has entered into force on October 26, 1996, both of which are members of OECD, wherein Government of India has limited the taxation at source on FTS to a rate lower or scope more restricted than that provided in the aforesaid two DTAAs. The DTAA with USA and Germany provides that the term FTS shall include payments for rendering of technical or consultancy services that 'make available' inter alia technical knowledge and experience etc. (which is more restrictive in nature that the definition under France and Spain's DTAA with India).
In such a case, no NIL rate of TDS shall be applicable since services does not make available any technical knowledge skills etc.
Regards
Jatin Gupta
e-mail: jatingupta@vgglobal.co.in
Accordingly, the rate of FTS is 10% as per India-France DTAA as against rate of 10.5575% prescribed under the provisions of Income-tax Act, 1961, being more beneficial to the assessee.
In case service does not make available knowledge/ skills etc, protocol to India-france DTAA provides that If subsequent to signing of the DTAA with France, India enters into a treaty with a member of OECD, which limits the scope and rate of taxation of FTS, such lower rate and scope shall apply to India - France DTAA as well.
India has executed DTAA with USA which has entered into force on December 18, 1990 and with Germany which has entered into force on October 26, 1996, both of which are members of OECD, wherein Government of India has limited the taxation at source on FTS to a rate lower or scope more restricted than that provided in the aforesaid two DTAAs. The DTAA with USA and Germany provides that the term FTS shall include payments for rendering of technical or consultancy services that 'make available' inter alia technical knowledge and experience etc. (which is more restrictive in nature that the definition under France and Spain's DTAA with India).
In such a case, no NIL rate of TDS shall be applicable since services does not make available any technical knowledge skills etc.
Regards
Jatin Gupta
e-mail: jatingupta@vgglobal.co.in
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