Since the consultant is Non Resident company, the fees paid by you to Italian Company shall be deemed to be received in India and taxable in India because Explanation [2] to Section 9 states “For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) “. However the section under which the TDS is to be done is Section 195 and not 194J because 194J is applicable to Resident only.
Since there is DTAA between India and Italy on the point of technical services, and Article 13 of the agreement is regarding the taxation of “technical services” which is given as under
: “Article 13 : Royalties and fees for technical services – 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 20 per cent of the gross amount of the royalties or fees for technical services.”
Therefore , You should deduct the tax at source at the rate of 20%.
As far as requirement is required , every tax deductor has to apply for Tax Deduction Number [TAN] and I presume you have PAN already. You apply with the TDS cell of the Income tax department and apply there in prescribed form 49B for TAN . You can also apply online for TAN allotment by visiting www.incometaxindia.gov.in
Hello,
My company is a registered company in Israel but doing lot of business in India as well. Company supplies telecom solutions which includes hardware, software, services. We generally invoice three in different bills.
Question I have is: Our buyers deduct withhoding tax@ 10% for software and no tax on hardware as we are a foreign company so no tax on hadware. But due to some new rule from April 2010, if foreign company does not have PAN in India, withholding tax on software would be 20%.
Now, will it aLSO DEDUCT TAX ON HARDWARE AS WELL???
Anyway we are in process of obtaining PAN, suppose we get it, hat will be earn other than retaining same 10% TDS on software/.
THANKS
Rajat Walecha