| Question And Answer | |
|---|---|
| Subject: | WITHHOLDING (TDS) RATE ON PROFESSIONAL/FEES FOR TECHINCAL SERVICE PAYMENT TO NRI |
| Category: | Income-Tax |
| Querist: | KARAN SHAH |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | fees for technical services, Non- Resident, S.195, TDS u/s 195, withholding tax |
| Date: | June 16, 2021 |
WHAT WILL BE THE WITHHOLDING / TDS RATE ON FEES FOR TECHNICAL SERVICE PAID TO NRI (RESIDENT OF USA). PLEASE NOTE, TRC OF THE NRI IS NOT AVAILABLE. CAN BENEFIT OF DTAA BE CLAIMED. WHAT IS THE TAX RATE AS PER INDIAN INCOME TAX ACT AND DTAA OF USA ON FTS. AS PER MY UNDERSTANDING IF THE RECEIVER DOES NOT HAVE PAN – THEN TDS AT HIGHER RATE OF 20% IS TO BE DEDUCTED. WILL THIS PROVISON BE APPLICABLE HERE?
Where a Tax Residency Certified (TRC) is not produced by a non-resident, they would not be eligible for any beneficial provisions under the respective Tax Treaty. An Indian Company will have to apply the provisions of domestic tax on any payment and withhold the tax accordingly.
For the purpose of withholding under section 195 of the Income-tax Act, 1961 (Act), the Finance Act, 2020 (2020) 428 ITR 1 (St), inter alia, prescribed the rate of 10 per cent on payment for Fee for Technical Services (FTS).
However, section 206AA of the Act applies to a situation where the payee has not furnished their PAN. In such a situation the rate of withholding would be the higher of rate specified under the Act, rate in force or 20 per cent.
The rate in force for withholding for FTS under Part II of the First Schedule of the Finance Act, 2021 is 10 percent.
Therefore, the withholding will have to be at 20 percent.
Note: Although there are judicial precedents stating that section 206AA of the Act will not override beneficial treaty provision; The payer in this case will not able to avail the benefit of such Pronouncements as the Payee has not furnished a TRC.
Dear Sir,
Could you advise me how much I need to pay TDS
TDS on (doctor) Professional fee to NRI doctor staying USA having PAN in India and providing services in India
Paid in July: consolidated amount paid (April to July) Rs.1400000-20% TDS u/s 195
Paid in Oct: consolidated amount paid (Aug and Sep) Rs. 400000-20% TDS u/s 195
Is this correct and what will be the interest to be paid for late TDS filing