Requirement to deduct TDS by Indian conapy - Impact of amendment in finance bill 2010

[madhavvan n]

when is tds required to be deducted by an indian company when payments are made to all non residents, does it require that the non resident should have a PE in India and the nature of payment should constitute income in hands of non resident. how to define income does any payment arising for services rendered in india by nonresident enough for deduction of tax. as finance bill 2010 contains a provision wherein the only criteria for the purpose of accrual of income as per sec 9 is that the services should have been utilised in india and the nonresident can render the service from any where in the world. does this amendment impact deduction of tax at source under Section 195 readers for your views

[Rama Krishana]

The question raised by you is a question which everybody must keep in his mind while making payment to non resident. The provisions of Income Tax are become more and more complex day be day and if a person liable to deduct TDS, he would face severe consequences. As per section 195, any sum which is taxable in India is subject to TDS in India. Therefore, every person liable to make payment to a non resident has to put himself in the capacity of non resident and decide that whether amount payable to non resident is taxable in India or not. Since the issue of tax ability of a transaction is proprietors issue, the decision related to one traction may not be relevant for another transaction.

AI Summary

Tax deduction at source: services utilised in India may trigger withholding on payments to non-residents even if rendered abroad. An Indian payer must withhold tax where payments to non-residents are taxable in India; the payer must assess taxability for each transaction. The Finance Bill amendment treats income as accruing in India if services are utilised in India even when rendered abroad, potentially expanding withholding obligations and requiring payers to evaluate service utilisation and deduct TDS accordingly.