We are starting to work with companies from Hong kong , Canada and United States where they would generate sales for our product here in India. They do not have a PE in India. They would be paid a fixed commission for each generated sale. Do we need to deduct any TAX at origin ? If yes then how would the company in other country claim the same.
Dear Sir,
As the service is provided in country outside India and one who is providing the service does not have a PE in India it is not taxable in India. So, there is no need to deduct TDS while making the payment.
Regards
Praneeth Thunuguntla
Chartered Accountant
Hi,
it will be important to see how these companies are generating sales for you and whether these services can fall within the definition of fees for technical services/ fees for included services. If yes, then tds deduction would be required. These companies will have to file return in India. They can claim tax credit in their country as per the law in those countries
if no, then this will be considered as business income and will not be taxable in India and hence no tds is required to be deducted.
As far as income tax is concerned the commission income would be taxable under section 5(2)(b) read with section 9(1)(i) of the Act.
As per section 195 any person paying any amount to NRI which is taxable in India whether or not he has permanent establishment needs to deduct TDS on it.
You might be saved on individual reading of each DTAA.
if you need further assistance feel free to contact me.
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Thank you
Dear Sir,
Hope you are doing well !!
It is advisable to take a phone consultation for detailed discussion.
Hello,
Since the services are not of the nature of fees for technical services and the foreign entity doesn't have any PE n India, the tax deduction is not required to be made on the commission amount.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Hello Sir,
No, there is no need to deduct tds on the same.
- TDS will be deducted keeping in view the provisions of income tax and DTAA. They should apply for TRC in their residence country. Also they should apply for PAN in India to avoid application of section 206AA.
