Surcharge & Cess Applicable on Withholding Tax if Payee Not Covered Under DTAA

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Surcharge and education cess are tow extra component of tax which a person is required to pay under Income Tax Act. The extra taxes are  applicable while deducting tax at source under various tds provisions . Therefore , the question of adding education cess and surcharge while withholding tax from payment to a non-resident is real question which every deductor has to decide. Tribunals have gone into this question and have held that when a payee is covered by Double Taxation Avoidance Agreement (DTAA) , in such case the DTAA supersede and if the agreement between two countries do not provide for any other tax , than the tax rate mutually agreed between India and payee’s country, only that rate has to be applied . In other words , there is no question of adding surcharge or education cess while withholding tax on payments to a non resident.

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