TDS U/s 195 - Foreigners

This query is : Resolved

CA Jithesh C (Querist)
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18 May 2010 Dear Experts,

Kindly let us know whether we should deduct TDS from out off pocket expenses of foreign consultant U/s 195.

Thanks.

taxindiaconnect

taxindiaconnect (Expert)
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18 May 2010 Section 195 of the Act casts an obligation on a resident tax payer making payment to a non resident in respect of an income taxable in India to withhold tax at the rates applicable. The tax is not required to be deducted from the payments made outside India to a NR if the income of NR is not taxable in India. The income of the NR is taxable in India if it satisfies certain conditions.

Since the out of pocket expenditure is not a an income of the recipient, it’s is just an reimbursement of cost, TDS is not applicable in this case if the supporting actual bill are available. Other wise TDS is applicable under section 195 @ 10% if PAN is available. If not PAN the tax rate would be 20%.