TaxTMI 
TaxTMI 
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
Tds on reimbursement
31 Jan 2010 
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TDS on cross-border reimbursements may apply only if the payment is taxable in India under Section 195.
Whether reimbursements by Indian subsidiaries to a foreign holding for apportionment of a global insurance premium attract withholding under Section 195 depends on whether the sums are taxable in India and on the commercial characterisation of the payments; genuine cost-to-cost reimbursements for risk coverage that do not constitute income chargeable in India do not require withholding, whereas recharacterisation by tax authorities or a taxable presence of the foreign recipient may give rise to withholding obligations. (AI Summary)
Whether reimbursements by Indian subsidiaries to a foreign holding for apportionment of a global insurance premium attract withholding under Section 195 depends on whether the sums are taxable in India and on the commercial characterisation of the payments; genuine cost-to-cost reimbursements for risk coverage that do not constitute income chargeable in India do not require withholding, whereas recharacterisation by tax authorities or a taxable presence of the foreign recipient may give rise to withholding obligations. (AI Summary)