Tds deduction of vendor o/s india

This query is : Resolved

CA CS Sandesh Kamtekar (Querist)
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21 August 2011 I have to deduct TDS of vendor from UK as we are making payment of annual fees of SUN software.
The are having Branch Office in Mumbai.

What is rate of TDS?

Who has to give Permanant Establishment (PE) declaration?

What is Format of PE Declaraton?

Please clarify relevant provisions.

Arihanth Jain

Arihanth Jain (Expert)
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23 August 2011 PE declarations are required to determine taxability of a transaction where the income falls under the category of 'Article 7 - Business Profits' of the DTAA. However Article 7 also quotes that 'where profits include items of income which are dealt with separately in other Articles of this convention, then the provisions of those Articles shall not be affected by the provisions of this Article'.

As it seems like your paying to the UK vendor for software AMC services, the same shall fall under 'Article 13 - Royalty & FTS'. As per Article 13 - FTS shall be taxable if there is knowledge made available by the UK vendor. Rate of tds shall be 20% both under DTAA and I T Act.
Please also consider the applicability of the 'make available' clause in you case.

Further in any other case where required, PE declaration can be taken from the NR, preferably in their letterhead.