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With holding tax

Mihir (C.A. (Inter)) (33 Points)

16 June 2011

How to adjust with holding tax where there is no DTAA? Can we claim with holding tax to P & L or should be reduced from our total tax liability?

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6 Replies

Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 21 June 2011

Sorry but your query seems a bit unclear.

Anyways withholding tax (WHT) is similar to tds credit. Its not an expense to be charged to P & L ac. So Assessee can surely adjust it against its final tax liability (which depends upon circumstances).

For example if a NR has received payments from a Indian resident after WHT. When such a NR determines tax liability in India and pays final taxes, he/she can claim such WHT against the final tax payment.

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suman (Auditor ) (388 Points)
Replied 21 June 2011

yes your final tax liability will be reduced by the amount of withholding tax deducted.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 21 June 2011

But suppose my foreign client makes a WHT amd pays me. My AO in india will not be able to check this in Form 26AS or NSDL portal. Then how an my AO in india grant me refund ?

please enlighten

Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 21 June 2011

In this case I understand that Indian resident receives payments from a non-resident. For WHT done all countries shall have respective tax credit mechanism like India has Tds certificates., I guess this should satisfy the AO. Further also determine whether such an income is liable to tax in India or the other foreign country.

If its taxable in India then file returns in the other country as per their guidelines and Indian resident should get a refund as income is not taxable in such other country.

If its taxable in foreign country I dont think question of refund arises.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 21 June 2011

Arihanth

Thanks for your observation. You mean to say that the WTH certificate (in their design and mode ) issued to me by my foreign client as per their country norms would satisfy my AO in india. So even though my AO will not catch this in my 26AS yet he will grant me refund.

Have i understood correctly. Kindly confirm

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Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 21 June 2011

Pardon me if my last post was unclear.

I meant that there will not be any refund in India. Assessee has to pay full taxes in India if the income is chargeable to tax in India and in such a case the foreign country shall grant refund of WHT done by the NR.

If the income is chargeable to tax abroad then no point of any credit/refund arises.

For example; say an Indian Co. deducts some WHT any pays to a USA Co. If such an income of the USA Co. is fully taxable abroad then USA Co. shall pay its local income taxes in USA, and also file a return in India for claiming refund of WHT deducted by the Indian Co. Same principle should apply viceversa also.