TDS APPLICABILITY
This query is : Open
06 January 2010
XYZ is a company based in Germany manufacturing automated folding machine..
ABC (FROM INDIA)assist the sales of these machines in India to end-users, who are printers. When XYZ sells machines in India, they invoice the end-users directly and pay commission to ABC. Also for the spare parts sold to the customers, XYZ pays commission.
ABC in turn help them identify customers and inform the same to XYZ. XYZ also provide service to the machines during the warranty period.
The commission is received in foreign exchange
WHETHER TDS IS APPLICABLE ON ABOVE COMMISSION TRANSACTION? IF YES THAN IN WHICH CATEGORY? % WHO WILL DEDUCT THE TDS & AT WHAT RATES?
ABC (FROM INDIA)assist the sales of these machines in India to end-users, who are printers. When XYZ sells machines in India, they invoice the end-users directly and pay commission to ABC. Also for the spare parts sold to the customers, XYZ pays commission.
ABC in turn help them identify customers and inform the same to XYZ. XYZ also provide service to the machines during the warranty period.
The commission is received in foreign exchange
WHETHER TDS IS APPLICABLE ON ABOVE COMMISSION TRANSACTION? IF YES THAN IN WHICH CATEGORY? % WHO WILL DEDUCT THE TDS & AT WHAT RATES?
06 January 2010
I am of the opinion that in the above case no TDS is require to deduct.
06 January 2010
I also agree with Mr. Bimal Thacker, as TDS is to be deducted by principal and not by commission receipient. As the payer is foreign national and he maintain his accounts as per their laws and not as per Indian laws, hence TDS should not be deducted
06 January 2010
I have a view contrary to above ....
Please note that Section 194H reads as follows -
194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed two thousand five hundred rupees :
It is very clear from the above that Payer is a Company based in Germany. Therefore, it is a Non resident for the purposes of Income Tax Act. Also, it is also covered by "person responsible to make payment" as specified u/s 204
Further, payment of commission is made to resident assessee.
Therefore, Section 194H will apply & company XYZ is liable to deduct tax.
Please note that Section 194H reads as follows -
194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent :
Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed two thousand five hundred rupees :
It is very clear from the above that Payer is a Company based in Germany. Therefore, it is a Non resident for the purposes of Income Tax Act. Also, it is also covered by "person responsible to make payment" as specified u/s 204
Further, payment of commission is made to resident assessee.
Therefore, Section 194H will apply & company XYZ is liable to deduct tax.
06 January 2010
Also note that global income of a resident assessee is taxable in India. Therefore, such commission income is also liable to tax.
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