TDS u/s 195

[ASHISH DESAI]

we have credited in Dec'09, commission to a non-resident company ( tax resident In Hongkong) for effecting domestic sales in India.they also do not have any PE in India.except this,every time commission was paid on export sales only. this was the only commission on domestic sales. TDS was deducted & paid @ 10%, in absence of DTAA between India & Hongkong, we interpreted that 'rates in force' as prescribed in S. 195 is to be taken as defined u/s 2 (37A)(iii) to mean either of three rates, as per S 90A, beneficial rates to the assessee should be considered.

no TDS on payment on commission on export sales was deducted/paid. however, this being commission on domestic sales, TDS was deducted @ 10%.

kindly clarify & advise our stand.

is TDS  applicable @ 40% on the payment of commission, in absence of their having PE in India?

[Surender Gupta]

For commission paid on sale of goods:

The rate in force shall be 30% in case of a person other than company not resident in India and 40% in case of a Company other than Domestic Company.

AI Summary

TDS on Commission to Non-Resident Company in Hong Kong Set at 40% Under Section 195 Due to No DTAA. A query was raised regarding the deduction of Tax Deducted at Source (TDS) under Section 195 for a commission paid to a non-resident company based in Hong Kong for facilitating domestic sales in India. The company has no Permanent Establishment (PE) in India, and typically, commissions were paid only on export sales without TDS. For this domestic transaction, TDS was deducted at 10% due to the absence of a Double Taxation Avoidance Agreement (DTAA) between India and Hong Kong. A response clarified that TDS should be 40% for non-resident companies without a PE in India.