Applicable TDS rate on Foreign Consultants and Procedure for Foreign Individual to apply for PAN

[mahesh upadhyay]

Case Detail: We have made the payments to Foreign Consultants for Designe Fees, Interior Consultancy Charges in USD and TDS to be deposited u/s 195 of Income Tax Act. From the F.Y. 2010-11, TDS to be deducted @ 20% who doesn't have their PAN No. We have payment to Foreign Individual or Foreign Company who don't have their permament establishment in India. Please advice us for the following issues, 1.what is rate to be applicable on Foreing Consultants from the F.Y. 2010-11? 2. Is there any way to deduct the TDS at lower Rate either by applying PAN no in India or any other way? If Yes, what is the proceadure to apply PAN number for Foreign Individual and Foregn Company.

[CAGOPALJI AGRAWAL]

Tax would be deductible at lower of the following: tax as per normal tax rate, tax as per treaty. If the deductee has no PAN, then 20% due to provision of section 206AA which is very controvesial issue at the time.

[Anuj Gupta]

The facts given by the querist are not very clear. The country to whom payments are being made is not specified. Also whether the payee is an individual or company is also not specified. Also the exact nature of payment is also not clearly mentioned. I would request Mr. Mahesh to kindly provide these details to come to any conclusion.

AI Summary

TDS on foreign consultants: withhold the lower of domestic tax or treaty rate, lack of PAN increases withholding. Withholding on payments to foreign consultants must be the lower of the domestic tax computation and any applicable treaty rate, and absence of a Permanent Account Number (PAN) materially increases withholding under rules requiring higher deduction when PAN is not furnished; determining treaty relief and correct withholding requires details of payee status, residence and nature of payments and may make PAN procurement essential.