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Tds on foreign payment

pallavi jain (student) (123 Points)

27 January 2016

our company has made payment for technical services to a company in Germany on which we have deducted TDS at the rate of 10% as per DTAA norms.Now we have to file the TDS return which is asking for PAN. Since German company does not have PAN number therefore we are unable to file the same. My question is whether TDS should have been deducted at the rate of 20% since PAN is not available and if not so then how the TDS return is to be filed

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8 Replies

Mayur Kashinpure (Student) (341 Points)
Replied 27 January 2016

Originally posted by : pallavi jain
	our company has made payment for technical services to a company in Germany on which we have deducted TDS at the rate of 10% as per DTAA norms.Now we have to file the TDS return which is asking for PAN. Since German company does not have PAN number therefore we are unable to file the same. My question is whether TDS should have been deducted at the rate of 20% since PAN is not available and if not so then how the TDS return is to be filed

Yes, TDS should have been deducted @ 20% in your case as PAN wasn't provided (Section 206AA). In case TDS is not deposited within due date, liability for short deduction default & interest thereon arises.

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CA Saloni (Manager-Accounts & GST Consultant) (5124 Points)
Replied 27 January 2016

Before entering into agreement with you the foreign party should have applied for PAN in india, if not TDS @ 20% has to be deducted.

pallavi jain (student) (123 Points)
Replied 27 January 2016

bt it says that if DTAA is applicable then there is no need for PAN. It was also decided by tribunal in serum institute of India ltd.

pallavi jain (student) (123 Points)
Replied 27 January 2016

please read page no 7 of this case

Attached File : 702793 20160127163053 ddit vs serum institute of india limited itat pune.pdf downloaded: 170 times

valji (Accounts manager-MBA) (2150 Points)
Replied 28 January 2016

i have same doubt when party giving TRC ,TDS should be deducted 10% as per DTAA as per the sec 90 of the income tax act.

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neha mishra (CA ) (51 Points)
Replied 28 January 2016

SEC 206 AA OF INCOME TAX ACT HAS OVERRIDDING EFFECT ACCORDING TO THIS SEC "

Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

SO U HAVE TO DEDUCT TDS @ 20%

pallavi jain (student) (123 Points)
Replied 28 January 2016

I agrre with you Neha mam. As per sec 206AA it should be 20%. But pls read these 2 pages, the marked part. This has been taken from Taxman's direct tax ready reckoner.

Attached File : 702793 20160128130418 page 1.jpg downloaded: 268 times