Tds on reimbursement

[Gopalarathnam Muralidharan]

This question relates to Sec40(a)(1a) read with Section 195. Holding company situated outside India, takes a global insurance policy for all its subsidiaries. The cost of premium paid is apportioned to its various subsidiaries on the basis of the turnover of the respective subsidiaries. Reimbursements are absolutely on cost to cost basis and no element of profit is embedded in the transaction. Whether this transaction would fall within the purview of Section 195 and consequent disallowance for non deduction of TDS

AI Summary

Debate on TDS Applicability for Global Insurance Reimbursements by Indian Subsidiary Under Section 195 of Income Tax Act. A discussion on a forum addressed whether reimbursements for a global insurance policy, paid by an Indian subsidiary to its foreign holding company, are subject to TDS under Section 195 of the Income Tax Act. The holding company allocates insurance costs based on subsidiaries' turnover. One participant argued that TDS applies only if the payment is taxable in India, questioning the reimbursement's nature. Another participant emphasized that the reimbursement is cost-based without profit, thus not liable for TDS. A third participant suggested that if the foreign insurer lacks a Permanent Establishment in India, no TDS is required.