18 April 2022
My bank HDFC is confused if there will be a Tds deduction if my LLP entity has to make any invoice payment to a USA company (or to any foreign company) for taking their services. The USA company has no office in India, they operate in USA. The services taken from them involve recruitment/identification of relevant persons who can be located anywhere in the world and scheduling phone interviews/discussions with them to discuss a project topic for 30-60 minutes. We need this discussion as part of primary research to gather info in order to deliver our research/consulting projects. I'm dealing with two USA entities both of who say they deal with multiple clients in India who do not need to deduct any tax and that they will not be able to use any such deduction as their input credit when they file their return at the end of the year.
Kindly share if in this case 15CA CB is needed and TDS is applicable or not?
11 July 2024
In the scenario where your LLP entity is making payments to a USA company (or any foreign company) for services rendered outside India, the applicability of TDS (Tax Deducted at Source) and the requirement for Form 15CA/CB would depend on the nature of the services and the provisions of the Income Tax Act, 1961. Here are some key points to consider:
### TDS Applicability:
1. **Section 195 of the Income Tax Act:** - Section 195 deals with payments made to non-residents (foreign companies/entities). It mandates that any person making a payment to a non-resident which is chargeable to tax in India is required to deduct TDS. - Whether the payment made to the USA company is chargeable to tax in India would depend on whether it constitutes income that is deemed to accrue or arise in India, or is income that is deemed to be received or deemed to accrue in India.
2. **Services Nature and Taxability:** - From your description, the services provided by the USA company involve recruitment and scheduling discussions which are primarily conducted outside India. - Generally, if the services are performed entirely outside India and the income is not attributable to any operations carried out in India, it may not be considered as income chargeable to tax in India. - The USA company's assertion that they deal with multiple clients in India who do not deduct TDS may not be sufficient to determine TDS applicability. Each payment needs to be evaluated based on the specific circumstances and nature of services provided.
### Form 15CA/15CB:
1. **Requirement for Form 15CA/15CB:** - Form 15CA and 15CB are required for making any remittance to a non-resident. Form 15CA is a declaration by the remitter (your LLP entity) whereas Form 15CB is a certificate from a chartered accountant certifying the details of the payment, withholding tax rate, and compliance with the Income Tax Act. - The applicability of Form 15CA/15CB depends on whether the payment is taxable in India. If the payment to the USA company is not chargeable to tax in India, Form 15CA/15CB may not be required. However, banks may still require these forms for their records.
### Conclusion:
Given the nature of services provided by the USA company and assuming they are performed entirely outside India, the income may not be taxable in India. Therefore, TDS may not be applicable in this case. However, it is essential to conduct a thorough assessment based on the specific facts and circumstances.
To ensure compliance:
- Consult with a qualified chartered accountant or tax advisor who can review the specific details and advise accordingly. - Confirm with your bank regarding their specific requirements for Form 15CA/15CB, even if TDS is not applicable.
This approach will help ensure that your LLP entity complies with the tax regulations while making international payments to foreign service providers.
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