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T.d.s. under which section

Prasanna (practice) (177 Points)

03 September 2012

One of my friend, who is a director of a Share Broking Co., wants to attend seminar in U.S. related to security market . Participation fees for the seminar is USD $4700/- which has already been paid by his cousin who is presently staying in U.S. on his behalf. Now my friend wants to re-imburse and remit the said fees to his cousin. The said remittance will be made by the company of which he is a director and to be claimed as business related expenses.

Is T.D.S. is applicable on said remittance? under which section? His cousin is assessable to tax in India as non-resident.

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25 Replies

Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

As per my opinion, TDS is NOT deductable.

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Shridhar Shah (Chartered Accountant in Practice) (172 Points)
Replied 03 September 2012

Agree to Rahul

(Guest)

TDS provision applicable under section 195 payments to non residents...

As per section 195 of income tax TDS on payment to non resident as under

Payer: Any person resident in india

Payee: Any Person being Non resident or foreign company

Amount: Any amount

Rate: Either rate prescribed in relevent finance act+ SC+EC or rate as per DTAA us 90 / 90A

Nature of payment : any payment other than salary which attract TDS u/s 192 and other than those payment which covered by section 194B/ 194BB/ 194E

If payer of income consider that entire amount paid by him not be taxable in the habds of Non resident payee then such payer can make an application to AO to determine the amount taxable in the hands of payee and issue certificate and as per that TDS will be deducted u/s 195

Even non resident Payee can also make application to the prescribed AO in form no 13 to grant certificate , authirising him to recive payment without deducting TDS...

I hope this explanation will help you to solve ur problem....

Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

Tax is required to be deducted at source i.e. The source should be some type of Income but in this case No Income is accrued or deemed to be accrued. So NO TDS

1 Like

(Guest)

@ Rahul :

Its income for non resident in above case it is income for Seminar organisor of US...

And expense for Indian company in which the above mention person is Director...

So correct me with example if i m wrong,,,

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Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

Originally posted by : ketan joshi
	@ Rahul : Its income for non resident in above case it is income for Seminar organisor of US... And expense for Indian company in which the above mention person is Director... So correct me with example if i m wrong,,,

Surely It is NOT an Income in the hands of US seminar orgnisors.

(Guest)

Then please give accounting entry for the above transaction in the books of Indian company and in the books of foreign organisor...

Its really neccessary for me to know the correct answer

Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

Originally posted by : ketan joshi
	Then please give accounting entry for the above transaction in the books of Indian company and in the books of foreign organisor... Its really neccessary for me to know the correct answer

Accounting entry will remain same for Indian co & US co. as if they are accounting for the domestic transection.

1.In the books of Indian co.

Seminar/ Director training exp..............Dr

To Bank A/C

2.In the books of US co.

Bank A/C...................................................Dr

To Income from Seminar A/C

(Guest)

oke...I think you take it as no income for the friend of director who pay fees on behalf of direcor...but u/s 195 tds provision attracted for any payment to non resident ..so here payment is done ..so whty TDS no apllicable..

Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

Originally posted by : ketan joshi
	oke...I think you take it as no income for the friend of director who pay fees on behalf of direcor...but u/s 195 tds provision attracted for any payment to non resident ..so here payment is done ..so whty TDS no apllicable..

Think like this. If you send money to US to your family, them Is is payment for the purpose of S.195? Further, Payment should mean that the amount should be consider as INCOME in the hands of recepient.

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(Guest)

yes thts right...i am understanding the point of view...but still there is doubt in my mind that what haapen the amount paid by friend of director to seminar organisor...

Your point of view is right and thanx a lot for clarification..

But then if anybody want to pay foreigner for any service then he wil no directly expensed it but remmit to their relative and they subsequently pay to that foreigner in their foreign currency...so no tax consequence al all and its tax evade i think...ot its tax management??

thanx once again for participating in discussion

Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

Originally posted by : ketan joshi
	yes thts right...i am understanding the point of view...but still there is doubt in my mind that what haapen the amount paid by friend of director to seminar organisor... Your point of view is right and thanx a lot for clarification.. But then if anybody want to pay foreigner for any service then he wil no directly expensed it but remmit to their relative and they subsequently pay to that foreigner in their foreign currency...so no tax consequence al all and its tax evade i think...ot its tax management?? thanx once again for participating in discussion

No. Cant be Tax evasion. In instant case, whether you pay directly or via any chanel, It doesnt make any difference. Also, the friend of Indian director is acting only as intermediary.

To understand whole concept better, assume that there is no provision of TDS in The Income Tax Act & US co asks to Indian Income Tax authority " What is our tax liability?", then the reply from the Income Tax authority is "You are not liable to pay Income tax as amount received by you is not Income at all as It eaned on the foreign soil & also received outside India.

Sandeep (ASST.MANAGER ACCOUNTS) (1751 Points)
Replied 03 September 2012

This is expenditure reimbursed by the company. not an income of director. U/s 195 provision says TDS deduct for any payment of non resident. although in given condition amount is already paid by his freind therefor payment to freind- TDS will not deducted.

Rahul Balia (CA FINAL STUDENT) (206 Points)
Replied 03 September 2012

Originally posted by : Sandeep
	This is expenditure reimbursed by the company. not an income of director. U/s 195 provision says TDS deduct for any payment of non resident. although in given condition amount is already paid by his freind therefor payment to freind- TDS will not deducted.

He has query that whether the friend of Director will be liable for the Tax & not a query that whether the director will be liable to Income tax