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sec195 of I T Act

(Querist) 15 July 2011 This query is : Resolved 
when a resident remits any amount to a foreign client in his usual course of business say for fair stall rent will TDS will be applicable.? what will be the treatment when the NRI belongs to acountry which has DTAA with india. how to ascertain that NRI to whom amount is being remitted is a company or not. moreover if resident remitting the money has shown the expense in his P & loss account will TDS be attracted.
Amit Soni (Expert) 16 July 2011
1) TDS will be applicable
2) In case of DTAA the foreign national can claim the rebate of tax which has been deducted on the rent income
3) He can clear the status from the agreement according to which the person is paying rent.
4) No claim of expenses shall be allowed if no TDS is made & shall be liable for penalty for not deducting the tax.


If a person fails to deduct the whole or any part of TDS as required under any of the provisions of sections 192 to 196D then:
(a) The person responsible for deduction is treated as ‘assessee in default’
(b) He shall be liable to pay by way of penalty a sum equal to the amount which he failed to deduct.
(c) He shall be liable to pay simple interest @12% p.a. on amount of tax liable to be deducted.

Please also go through with the provision of section 206AA, the same is reproduced for your benefit:

206AA. Requirement to furnish Permanent Account number

(1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i) at the rate specified in the relevant provision of this Act; or
(ii) at the rate or rates in force; or
(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in accordance with the provisions of sub-section (1).

(4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5) The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section (1) shall apply accordingly.”
Anuj Gupta (Expert) 18 July 2011
when a resident remits any amount to a foreign client in his usual course of business say for fair stall rent will TDS will be applicable.?

If the payment is for stall rent then normally TDS should not be there but it may become applicable because of peculiar facts of the case.

what will be the treatment when the NRI belongs to a country which has DTAA with india.

then i presume payments is being made to NRI, then the relavent provisions of DTAA shall be seen.

how to ascertain that NRI to whom amount is being remitted is a company or not.

That shall be clear from the invoice .

moreover if resident remitting the money has shown the expense in his P & loss account will TDS be attracted.

Yes TDS shall be attracted even if the amount is not shown in P & L Account.

Anuj
+91-9810106211


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