TDS on Foreign Remmitance

[Pradeep Kaushik]

Respected All,

 

Our Company has to remit a payment against service to Korean Company in South Korea

According to the agreement between India & Korea the TDS shall not exceed 15 percent of the gross amount for technical services.

As per the rule implemented from 1.4.2010 if the deductee does not have a PAN the rate is 20.60%.  This is irrespective of the Double Tax Avoidance Agreement (DTA). Tax TDS rate on Service Charges is only 10% as per the Indian Finance Act, which is lower than the 15% mentioned in the DTA, but this is applicable for PAN holders only.

 

In Korea, Nobody has the PAN.

 

So at what rate, I have to deduct the TDS and how i issue the TDS certificate to that Korean Company. Pleasse Advice.

 

Best Regards.

 

Pradeep Kaushik

[CAGOPALJI AGRAWAL]

It is a very debatable issue and some experts are of the view that provisions of section 206AA would not apply while others view otherwise. It is better to have PAN to avoid the litigation.

[Pradeep Kaushik]

Dear Gopal Ji,

 

But there is no procedure of having PAN in South Korea.

Please Clarify.

Best Regards.

Pradeep Kaushik

 

[CAGOPALJI AGRAWAL]

No,, you are required to take PAN in India.

 

[Pradeep Kaushik]

Dear Gopal Ji,

So please let me know at what rate should I deduct the TDS from Payment to South Korea Company. The Detail is already mentioned in my above cited query.

 

Best Regards.

 

Pradeep kaushik

 

[CA Rachit Agarwal]

PAN is referred to that as per Indian Income Tax Law. PAN will be issued from India only. Korea company has to get PAN from India. There are separate set of procedures to get PAN for non-resident.

If PAN not available then TDS will be @ 20%.

[Guest]

I also suggest that TDS should be deducted @20%. That will be the safest way.

AI Summary

Indian Company Must Deduct 20% TDS for Korean Services Without PAN, Despite DTAA Agreement Suggesting 15% Limit A company in India is remitting payment for services to a Korean company and seeks advice on the applicable Tax Deducted at Source (TDS) rate. According to the Double Tax Avoidance Agreement (DTAA) between India and Korea, TDS should not exceed 15% for technical services. However, Indian law mandates a 20.60% TDS rate if the foreign entity lacks a Permanent Account Number (PAN). Since Korean entities typically do not have PANs, experts suggest deducting TDS at 20% to avoid legal issues. The process for obtaining a PAN for non-residents is outlined, but it remains a complex issue.