No TDS on payment to Non resident Consultant!

No TDS on payment to Non resident Consultant!

Someone Asked on This blog

Is TDS applicable to foreign consultant who renders service outside India (namely in USA). Foreign consultant is US based and does not have PE in India. From: sundar.prakash@hotmail.com

In my view , TDS is not applicable in case of payments to him .

TDS is applicable only when the INCOME is chargeable under Income Tax Act. This on account of Section 4[2] of the I T Act.So the first issue to decide whether RECEIPT by foreign consultant is taxable in India.

Since foreign consultant is Non Resident , his income received in India

or accrued in India or deemed to be received or accrued in India. If the payment is made outside India, it is certainly not received in India. As far as accrual is concerned , since the services are rendered out side India also does not bring the amount within the ambit of deeming provision as provided in Section 9 of the I T Act.

In this regard , you should note that the general rule of TDS in case of payments to Non Resident is given under Section 195 of the I T Act. However, if the services are given outside India by a Non Resident who is also paid outside the country , does not fall under the provision u/s 195 of the I T Act . There was great