tds on payment to foreign company

TDS 1137 views 2 replies

PIYUSH AGARWAL

CHARTERED ACCOUNTANT

91 Points Joined December 2008

our client P is a software development company in India , P is developing a software for Q which is a manufacturing company in Ethiopia , P is also taking technical services from R(Ethiopian consultant) for this purpose

After getting payment from Q in India P paid the fee for technical services to R in Foreign Currency

Now my question is in relation to latest amendment in section 9 is that 1)whether P is required to deduct TDS on Payment made to R 2) R has no any PE(permanent establishment ) in India and not accrued or receive any income in India whether R is taxable in India 3) If tax is deducted what are the provisions of DTAA in this regard

Replies (2)

SRINIVASA MURTHY

Asst Manager (Finance)

186 Points Joined September 2008

Income deemed to accrue or arise in India. Sec 9

Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,—

(i) The non-resident has a residence or place of business or business connection in India; or

(ii) The non-resident has rendered services in India

Clause (vii)

income by way of fees for technical services payable by—

(a) the Government ; or

(b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or

(c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India :

Shudhanshu Agrawal

Business

2570 Points Joined May 2008

Yes, TDS need to be deducted as Sec 9, Sec 5 and Sec 6 are basic section of the Income Tax Act and if any income is taxable in these sections then TDS deduction should be considered.