HI,
We as foreign company are paying rent(residence) to a domestic company .
Do we need to pay tds ? And if so how?
We do not have any PAN or TAN or even an account in INdia?
Please let us have the details immediately.
Thanks
Sindhu
Sindhu (A) (34 Points)
04 March 2010HI,
We as foreign company are paying rent(residence) to a domestic company .
Do we need to pay tds ? And if so how?
We do not have any PAN or TAN or even an account in INdia?
Please let us have the details immediately.
Thanks
Sindhu
Ketan
(Ass. Finance Manager)
(92 Points)
Replied 04 March 2010
Sindhu
(A)
(34 Points)
Replied 04 March 2010
Hello Mr. Ketan,
Yes , we are not registered and we do not intend to do so just for this payment.(This is the first such expense)
We neither show any expenses nor file any returns in India.
We show this as expenses in our account (Singapore) And it is subject to tax.
But my question is - The landowner is still an Indian (company) -- and receiving rental income from us.
He has to pay tax on this right?
Or is there an exemption saying "Rentals received by a Domestic company from Foreign companies is exempted"
Thanks
Sindhu
CA. ANKUR
(ASST. MANAGER ACCOUNTS)
(54 Points)
Replied 04 March 2010
Dear Sindhu
For deducting TDS you shuold be a person register under ITAct of India as per your explanation provided above you are neither register nor an indian company then there is no question of deducting TDS on rent.
But for safer side please refer to section 9 regarding nexus with india.
Sindhu
(A)
(34 Points)
Replied 09 March 2010
Hello Mr. Ankur,
Thanks for the advice. It makes some things clear.
But the section 9 was discussing more on the income received by NRI's.
The question here is income received by resident from a foreign company.
So I am still not sure. Do we need to get a NOC from the Assessment officer for this payment by us(foreign company) for non payment of TDS?
Please confirm.
Thanks
Sindhu
CA. Anuj Gupta
(Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA)
(7024 Points)
Replied 04 October 2011
Mr. Sindhu,
Sec. 194I covers the said payment.
Sec 194 I provides "Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent.........................."
Nowhere any exemption has been given under sec 194I to non resident Company to not deduct TDS for any rent payment to Indian Company.
so your Company shall need to obtain TAN and deduct TDS for the rent payment.
Anuj
+91-9810106211
femaquery @ gmail.com
amitmehta_ca
(CA, CMA)
(99 Points)
Replied 29 October 2011
Dear Mr. Anuj,
I just want to ask you one qus regarding the payment of rent without deducting any TDS
My qus is what will be the impact on NRI co if it pays rent without deducting TDS as it is not at all claiming the expense or having any business in INDIA. So, the provision of disallowing the expenditure never comes into picture.
Please do explain the consequences of non deduction.
Regards
Amit Mehta
amitmehta_ca
(CA, CMA)
(99 Points)
Replied 29 October 2011
Dear Mr. Sandhu,
I just want you to provide some more details regarding the situation of property(whether in India or Outside India).
Secondly whether the payment was made in foreign currency or Indian currency.
Regards
AMIT MEHTA
CA. Anuj Gupta
(Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA)
(7024 Points)
Replied 29 October 2011
Dear Amit,
I agree with you that practically it shall be difficult for the ITO to do what is provided in law, however you never know" What an Indian ITO can do."
Anuj
Also as regards your query to Sandhu "Secondly whether the payment was made in foreign currency or Indian currency" shall have no bearing on the Tax deductible at Source.
amitmehta_ca
(CA, CMA)
(99 Points)
Replied 29 October 2011
Dear Anuj Sir,
Double Taxation avoidence agreement article 24 paragraph 1
"" Nationals of a contracting state shall not be subjected to other contracting state to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that state in the same circumstances, in partiicular with respect to residence are or may be subjected.""
Please clarify as per my understanding TDS deduction applicability will be burdensome.
Regards
Amit Mehta
CA. Anuj Gupta
(Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA)
(7024 Points)
Replied 29 October 2011
Amit,
Article 24 means that any country say India can't impose any requirement which is other or more burdensome than the taxation than requirements imposed on residentd of India.
So if Govt. of India asks you and me to deduct TDS for payments being made to Indian residents then how it can be more burdensome to foreigners.
Anuj
+91-9810106211
femaquery @ gmail.com
amitmehta_ca
(CA, CMA)
(99 Points)
Replied 31 October 2011
Dear Sir,
As per my understanding we are suppose to claim the payment made as expense whereas foreigners are not claiming that payment as an expense in India. It wil be brudensome for them as this will result in unnecessary burden on them despite of not getting any benefit and not claiming any expenditure in India.
Regards
Amit Mehta
Hari Wadhwa
(CA in Practice)
(485 Points)
Replied 01 November 2011
Dear Amit
TDS PROVISIONS ARE ALSO APPLICABLE TO NON-RESIDENT PAYERS
192 Salary ….Eli Lilly & Co. 312 ITR 225 (SC)
194 B Winnings from lottery or crossword puzzle
194 BB Winnings from horse race
194 G Commission etc on the sale of lottery tickets
…..”(2) Where an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may, if the assessee has property in a country outside India (being a country with which the Central Government has entered into an agreement for the recovery of income-tax under this Act and the corresponding law in force in that country), forward to the Board a certificate drawn up by him under section 222 and the Board may take such action thereon as it may deem appropriate having regard to the terms of the agreement with such country.”
Simply going through the provisions of Section 194I……. “Any person, not being an individual or a Hindu undivided family, who is responsible for paying to any person any income by way of rent, shall….” clearly create a liability on the foreign company to deduct TDS for making payment of rent to the resident as the term "Any Person" includes ANY PERSON INCLUDING NR ALSO)
amitmehta_ca
(CA, CMA)
(99 Points)
Replied 01 November 2011
Dear Hari,
As per Sec 10(6)(vi) Foreigners on tour
Goin through the above section it is quite clear that the TDS is not deductible if foreign co is not engaged in any trade or business in INDIA and such remuneration is not liable to be deducted from the income of employer chargeable under this act i.e. Income Tax act.
As per the given case foreign co is not having any income taxable under this act i.e. rent paid
and the foreign co. is not having any business in India.
Regards
Amit Mehta
Hari Wadhwa
(CA in Practice)
(485 Points)
Replied 01 November 2011
Dear Amit
pls read the Supreme court judgment
along with section 9(1)(ii) & section 192.
Through this judgment, supreme court has clearly reversed the order of the High Court & confirming the liability of the foreign co to deduct tds on salary.
U/s 9 (1) (ii), salary received abroad is deemed to arise in India if it is for services rendered in India. This charging provision has to be read with the machinery provision of s.192 and both are part of an integrated code;
thus, what need to be seen is whether the income has been accrued or arise in India or not.
The conclusion drawn by you from the Section 10(6) above that the company is not liable to deduct TDs on salary is not correct as the provision is expressed in a different context. pls read it again & try to interpret thoroughly. No conclusion can be drawn from this section which alows a foreign co to not to deduct TDS on its foreign expatriats.
Further, from this section this conclusion can also NOT be drawn that a company not involved in any trade or business in India but paying salary to its Non resident employees whoes income is accruing or arising in India need not to deduct TDS from it's employees' salary.
Moreover, the provision of section 192 read as : -
(1) Any person responsible for paying any income chargeable under the head "Salaries" 1676 shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made on the estimated income of the assessee under this head for that financial year.
thus, the term "Any Person' clearly includes ANY PERSON INCLUDING NON RESIDENT PAYERS AS WELL.
Also read sub section 6 to section 192 as well which talks about deductibility of TDS when salary is paid in foreign currency.
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