Dear Sir ,
We have to make legal and professtional fees to brazil , pls let me know the rate of TDS tobe deducted on paymnet u/s 195 of the act , and i read DTA agreement as well as with holding rate chart in the income tax site , the rate mentioned as " no separate provision " , what is that meaning , let me know the percentage of deduction ?
BALAJI N V
(Partner)
(28 Points)
Replied 09 August 2011
If the DTAA does not cover the payments as fees for technical services, the same would be subject to tax as business profits. Please refer Article 7 of the DTAA. Income of the service providers (who receive the fees) would be taxable in India, only when they have PE in India. In case they do not have PE, the income is not taxable and consequently there is no liability to deduct tax at source.
Pls provide proper answer to my question, my question is the payment fully covered under independent persional services , hence what is rate of dedction ? , ( Note : under finance act 2010 amendent for deemed to accrue or arise in india to a non resident whch is not consider PE , utilisation in india is important )
CA. Anuj Gupta
(Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA)
(7024 Points)
Replied 09 August 2011
If the rate is not provided in DTAA then the rate of deduction shall be as per Income Tax Act,1961, which provides for deduction of TDS @ 10.51% under sec 115A(b)(BB) in case of fees for technical services.
Please feel free for any further query.
Anuj
+91-9810106211
femaquery @ gmail.com
PRITESHKUMAR S MANIYAR
(NONE)
(24 Points)
Replied 09 August 2011
In my opinion no tax will be deducted since there is no provision in DTA. Business income in taxable in the country where supplier or service provider has citizenship unless there is PE in India. This is a specific clause in DTA. Also DTA provisions are to be applied to the extent they are benificial to the assessee. Also section 115A(b)(BB) covers technical fees and not legal and professional fees. Hence no tax will be deducted.
For further query you can reach me at priteshmaniyar @ gmail.com or 09422878520
Arvind
(CA )
(47 Points)
Replied 09 August 2011
Venkatesan ji,
Since you have zeroed in that the payment is under Artcile 14 "independent services", following is my opinion
1. The "fee for legal servies" is definately taxable under Indo-Brazil DTAA, unlike other dta's where there is generally a period clause.
2.Under the income tax the same is taxable.
Regarding with-holding rates:
1. DTAA does not specify rate so we need to refer to IT act,
2. Sec 195 of ITR act, the above transaction may be categorized under FTS
so tds in case amout payable does not exceed 1 crore, is 10.3%.
if amt exceeds 1 cr then 10.5575% ( 2.5% surcharge and 3% cess
Refer to ready reconer u/s195.
CA. Anuj Gupta
(Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA)
(7024 Points)
Replied 09 August 2011
There is aspecific provision in DTA under Article 14
Article 14 : Independent personal services - 1. Income derived by a resident of a Brazil in respect of professional services or other activities of an independent character shall be taxable only in Brazil,unless the remuneration for such services or activities is paid by a resident of the India or is borne by a permanent establishment situated therein. In such case, the income may be taxed in India.
2.The term “professional services” includes especially independent scientific, technical, literary, artistic, educational or teaching activities of physicians, lawyers, engineers, architects, dentists and accountants.
Now since the rate for deuction of tax has not been provided under DTAA then we shall come back to Indian Income Tax Act,1961, for the rates of TDS which are provided under sec. 115A.
115A(b)(BB)the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of ten per cent if such fees for technical services are
received in pursuance of an agreement made on or after the 1st day of June, 2005; and]
Explanation.—For the purposes of this section,—
(a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;
Explanation [2].—For the purposes of this clause, “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction,assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.]
I hope the poistion is clear now.Rate of 10.51% is arrived at as follows:
10 [as per 115A(b)(BB)]+ (education cess) 3% + 2% (surcharge).= 10.506% or 10.51%
Anuj
+91-9810106211
femaquery @ gmail.com
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