06 September 2015
We have one client which provides MOOC (Massive Open Online Courses) worldwide, operating from india. To make these courses, they outsource their work to USA in Odesk and other freelancer websites where they make payment to numerous freelancer and instructors via odesk.com. Odesk is online portal which facilates to freelancer and outsourcer against its commission. Again, entire work which is outsourced is exported outside india. Now, 1. TDS applicable on this payments ?? Can we get exemption on the basis that whatever work they outsource from Foreign are Exported.
2. If applicable, then what rate as Odesk is based on USA and we do not have PAN. Secondly, payment is made to freelancers and not to Odesk. Odesk keeps that money unless work is approved. In this case Tds on commission to Odesk is also applicable?? We do not have PAN of any of Freelancers, then Tds on this payment is liable at what rate? Can we get any benefit under DTAA with USA?
07 September 2015
In this situation, the payer, I am presuming to be an Indian resident and not a foreign company.
This subject is a grey area in Income Tax today, as there are multiple instances of cash being routed from India through US platforms back into India. However, based on interpretation of current regulations, I've made this response.
Firstly, get a PAN, and a TAN - It's necessary to deduct Tax.
Odesk and various other Freelance platform companies are domiciled in the US, UK and Australia. For the sake of this example let us consider oDesk, recently renamed as Upwork, which is an American company.
This brings the ADT (Avoidance of Double Tax) agreement between India and the US into question. As per relevant article of the India-US DTAA, taxes levied in one country can be claimed as a tax credit in the other.
Since, the source of revenue for Upwork is in India, any income generated in India by Upwork is thus taxable, as normal. TDS would thus be applicable in this case as payment to a non-resident under section 195. In case you have concerns over how to deduct TDS, it is a genuine problem, reach out to the platform providers explaining your predicament, and they are bound to oblige.
Just to give you an example of the reverse situation, companies such as Amazon withhold tax on Royalties for Indian publishers. This is nothing but foreign income earned by Indians from the US. If they can withhold and pay, so can we.
You can refer this fine article on section 195 for more details:
07 September 2015
no withholding tax for payment made to NR for earning income outside india . IF income is earned outside inida, exemption can be claimed
07 September 2015
Thanks Divesh and Sudarshan for your valuable suggestion.Assess is RESIDENT COMPANY. We have both PAN AND TAN to Deduct TDS. But we are unable to arrange PAN of Foreign Parties. My concern is at what rate we should deduct TDS?? its Technical Fees/Professional Fees. Generally it comes 10.506 as per Section 195 but as we do not have PAN...We need to deduct TDS at 20%?? That amounts to major cost to us. and ultimately no one is going to get any credit of that tax.
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