TDS RATE FOR REMITTANCE ABROAD

[JAYANTL AASHER]

A GERMAN COMPANY HAS RENDERED TECHNICAL SERVICES TO AN INDIAN COMPANY. THE REMITTEE IE THE GERMAN COMPANY HAS SUBMITTED TRC AND NO PE CERTIFICATE AND HAS PAN TOO. WHETHER TDS WILL APPLY? IF SO AT WHAT RATE TDS SHOUD BE DEDUCTED BEFORE MAKING PAYMENT TO THE GERMAN COMPANY?

[PRIYACHARAN SR]

"My Opinion"
W.r.t querry on payment of technical services fee, please note that such payments are covered under section 9 of the Income tax act. The above payment gets taxed in the hands of non resident company in India, irrespective of the fact whehter such company has a PE in India or not, owing to explanation to section 9(2) which is produced below for your perusal.

"For the removal of doubts, it is here by 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) [Interest] or clause (vi) [Royalty] or clause (vii) [Fees for technical services] of sub-section (1) and shall be included in the total income of the non-resident, whether or not:

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

b) The non-resident has rendered services in India."

Kindly examine rates prescribed in India - Germany DTAA or the applicable rates as per Income tax act and you may withold TDS accordingly.

Further in case you wish to deduct TDS at lower rates, you may apply for certificate under section 195(2)/195(3)/197 with the jurisdictional income tax officer. By applying for a certificate, the transaction also gets validated with the income tax authorities before the payment is executed.
 

AI Summary

TDS on Payments for Technical Services to German Company Taxable in India Under Section 9; Check DTAA for Rates. A German company provided technical services to an Indian company, raising a query about the applicability and rate of Tax Deducted at Source (TDS) on payments to the German company. The German company has submitted a Tax Residency Certificate (TRC), a No Permanent Establishment (PE) certificate, and has a PAN. The response clarifies that payments for technical services are taxable in India under section 9 of the Income Tax Act, regardless of the company's PE status. It advises checking the India-Germany Double Taxation Avoidance Agreement (DTAA) or applicable rates and suggests applying for a certificate for lower TDS rates.