Payment to Non-Resident

[Shyam .]

We have booked ship space through third party (i.e foreign agency)  for import of goods in india.Now at the time of payment for ocean freight to third party in foreign currency  whether is it liable to TDS or not under section 195? 

  really appreciated if provide any legal language or case law.

[A Wilson]

Dear Sir,

If the Payments are made to an agent of a Foreign(Non-Resident) Shipping Liner. Tds need not be deducted on the following category of expenses:

1. Ocean Freight
2. Terminal Handling Charges
3. Demurrage Charges
4. Any other amount of Similar Nature (Like Addl.Ocean Freight/Addl.Demurrage/Addl.THC etc )

 Any other expenses not mentioned above, will be subject to deduction of TDS.

Reference:

•  Sec.172 of the Income tax Act 1961 – Shipping business of Non-Resident
• Income tax Circular 723 dated 19.09.1995

Thanks & Regards,

A.Wilson

AI Summary

TDS on payments to foreign shipping agents may not apply to ocean freight, terminal handling and demurrage charges. Payments in foreign currency to a foreign agent for a non resident shipping liner need not have TDS deducted when those amounts are ocean freight, terminal handling charges, demurrage, or other similar charges incidental to carriage; other expenses remain subject to tax withholding under the applicable provisions and administrative guidance.