Withholding Tax

[Pradeep Kaushik]

Respected Sir,

 

We are in process for ECB from Export Import Bank- South Korea.

We have to remitt Management Fee before Draw Dawn of the Funds under ECB.

Do we have to deduct TDS on the Management Fee, being remitted to Exim Bank- Korea.

If No, Please provide the reference.

If Yes, What is the rate.

Best Regards.

[Guest]

You are requierd to deduct TDS (U/S 195 )on this payment.

If the NRI has a pan in India , the rate is 10.30%

If the NRI does not have a PAN in India, the rate is 20%

Thanks

[MANDAVILLI RAMAKRISHNA]

advance payment to abroad without LC or BG is offence in case you fail to get the services?

[Guest]

Sir,

Advance payments up to USD 100,000 can be made to foriegn supplier without BG or LC at the descrition of the Authorised Dealer.

The proceedure for advance payment is available in RBI Master Circular on Import of Goods and Services - Master Circular No.13 /2012-13 July 02, 2012 (Updated as on October 05, 2012).  Please refer section C.1.1. Advance Remittance for import of goods - which states

(a) AD Category – I bank may allow advance remittance for import of goods
(b) In cases where the importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/State Government/s) is unable to obtain bank guarantee from overseas suppliers and the AD Category – I bank is satisfied about the track record and bonafides of the importer, the requirement of the bank guarantee / standby Letter of Credit may not be insisted upon for advance remittances up to USD 5,000,000 (US Dollar five million). AD Category – I banks may frame their own internal guidelines to deal with such cases as per a suitable policy framed by the bank's Board of Directors.
(c) A Public Sector Company or a Department/Undertaking of the Government of India / State Government/s which is not in a position to obtain a guarantee from an international bank of repute against an advance payment, is required to obtain a specific waiver for the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100, 000.

 

AI Summary

Withholding tax: TDS applies to management fee remitted abroad; higher rate if PAN not furnished; AD bank rules govern remittance. TDS must be deducted on management fees remitted abroad; a lower withholding rate applies if the foreign recipient furnishes an Indian PAN, and a higher rate applies if PAN is not furnished. Advance remittances for import payments without bank guarantee or letter of credit may be allowed by AD banks within their internal limits based on importer bonafides; public sector importers require a specific waiver from finance authorities before making larger advance remittances.