TDS

This query is : Resolved

Kiran Kumar V (Querist)
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16 June 2010 Dear members,
During an Internal Audit I have come across the following doubt regarding applicability of TDS and please clarify the same
M/s X is a Pvt.ltd company has been engaged in the business of providing offshore support services. During the financial year 2009-10, it has engaged a vessel namely A1, on charter hire basis, from a Singapore based company. It has sublet the vessel to their client in India. Their client has made TDS @ 2% under Section 194 I of the Act, on the amount of charter hire charges.
The said Foreign company has raised invoices dated 31/3/10, for charter hire charges on our client in India, who have accounted the same on 31/3/10, for which TDS has got to be made and to be paid within 2 months of accounting, namely on or before 31/5/10.
During the current financial year also, our Company has to make payments to some of the foreign based service providers/suppliers, in the nature of Charter Hire Charges. The said foreign company is already having the PAN, in India, with address of Singapore, without any place of establishment, in India, so far.
In the light of the above situation, I need your opinion regarding the applicability of Provisions of TDS, on the amount of Charter Hire Charges to be paid to foreign supplier.
I also request you to provide necessary clarifications, on the following issues:
• Rate of TDS to be made in respect of Charter Hire Charges to be made to non-domestic Company. Can they make lower rate of TDS or no-TDS as per the latest DTAA with Singapore, since Taxation Laws in Singapore have been considered to be liberal?
• If the client is entitled for lower rate of TDS as per provisions of DTAA, is it mandatory to approach the Income Tax Dept., to get the certificate for lower rate of TDS or can the Company make TDS at lower rate or No-TDS, even without approaching the IT Department (TDS Circle).
• Can I issue a certificate in the prescribed form, even if the Company does not get any certificate from ITO (TDS), merely based on the lower rate of TDS, if any provided as per the provisions of DTAA with Singapore?
• During the current financial year, if the foreign entity has got a place of establishment in India, what would be the rate of TDS applicable and the treatment of the Income earned by the foreign company in India. Does that foreign entity has to file a return of income in India?
• I would like to know the complete procedure for having permanent place of establishment in India for the foreign company, so as to enable us to make TDS at a rate applicable in India.
• whether the provisions of section 44BB are applicable in this situation for the payment of TDS.

With Best Regards,
Kiran Kumar V

Vinod Kumar Mathuria

Vinod Kumar Mathuria (Expert)
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17 June 2010 Rate of TDS is 40% in case of paymen to foreign company, but for lower deduction - apply to AO in form 15C/15D.

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