Applicability of WHT on import of Goods

[Ramanathan Seshan]

Dear Experts,

I would like to clarify whether A Ltd, an Indian company, is required to deduct TDS while making a payment of INR 5 crores to S Ltd, a Singapore-based company, for the import of goods into India.

Section 194Q of the Income Tax Act pertains to TDS on the purchase of goods; however, it is applicable only when the seller is a resident of India. Since S Ltd is a non-resident entity, the provisions of Section 194Q would not be applicable in this case, and hence, TDS under this section is not required to be deducted.

That said, should the applicability of TDS under Section 195 be considered for such cross-border transactions? Section 195 mandates the deduction of tax on payments made to non-residents, provided the amount is chargeable to tax under the Act. It covers payments such as interest or any other sum (excluding salaries), and the deduction is to be made at the time of credit or payment, whichever is earlier, at the prescribed rates.

Kindly advise on the appropriate TDS provisions applicable in this scenario.

Warm regards,

S. Ram

AI Summary

TDS Not Required Under Section 194Q or 195 for Payments to Foreign Sellers When Title Transfers Outside India The query concerns whether an Indian company (A Ltd) must deduct TDS on a payment of INR 5 crores to a Singapore company (S Ltd) for imported goods. The analysis confirms that Section 194Q is inapplicable as it only pertains to resident sellers. Regarding Section 195, which governs payments to non-residents, no TDS is required if the amount isn't taxable in India. For imported goods where title transfers outside India, the income is not considered Indian-sourced and thus not subject to Indian taxation. The responder recommends maintaining proper documentation (import contract, bill of entry, shipping documents) to demonstrate the transaction's nature and compliance with remittance rules.