Please let me know the is TDS is applicable on the payment of $399-599/month for Technical service. My client is in : 12597 Walsingham Rd., Suite B, Largo, FL 33774, USA
01 February 2013
Please do not deposit TDS yet. You should give a description of the services being rendered because as per the India - USA DTAA the definition of technical services is much narrower compared to income tax act. so maybe you do not need to pay TDS at all. so need the following information: 1. A description of the services being rendered 2. Whetehr the non-resident has PAN in India.
04 February 2013
Mr. Ranjeet, kindly take appropriate professional help in matter, otherwise things are so complicated that you may end up paying penalties and TDS from your pocket.
Also the us treaty has some beneficial provisions but question is that why would you risk the payment of TDS and penalties from your pocket, if the contention put forward by you is not accepted by ITO.
04 February 2013
I believe we as experts are expected to provide professional help. Secondly, an assumption should not be made regarding whether taxes in India are being borne by the deductor. The appropriate facts need to be understood before an opinion can be provided. Just as one would not like to pay penalty or interest, i think one would not like to pay tax unneccesarily. I request the querist Mr Ranjeet to provide all the facts so that an opinion can be given
07 February 2013
Your company has entered into an agreement for use of the Effectus Software which is a marketing tracking software. The software enables you to track the performance of marketing activities. (Correct me if i am wrong) For this your company pays $ 399 every month for the use of the software. The explanation 4 to Section 9(1)(vi)has clarified that for the purpose of Income Tax Act, right to use a computer software including granting of a license is royalty. The rate of tax under Income Tax Act is 10% plus education cess i.e 10.30% If however, the foreign company has no PAN in India, the rate of tax will be 20.6% u/s 206AA. Even as per India-USA DTAA, this would be taxable as Royalty or Fee for included service. Not treating it as such would be an aggressive possession as suggested by Expert CA Anuj Gupta. The rate under the DTAA is higher than the one offered by income tax act and hence i suggest applying the lower rate. in any case, you will have to approach a CA for the purpose of obtaining a CA Certificate (certifying the rate of tax) in Form no. 15CA & will have to upload on NSDL website a declaration in Form no. 15CB. These two documents will have to be provided to your Authorised Dealer for the purpose of making the remittance in Foreign Currency. Please note that if your company is going to bear the tax in india then you will have to gross up the tax. The effective tax rate will be x/(100-x) where 'x' is the tax before grossing up.
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