How Do We Handle TDS Deductions for Payments to Foreign Companies Without Delays?

Dear all, we have to make a payment to a foreign company for monthly hosting charges based on usage. Additionally, we need to pay them for a small website based on their product.

Our Chartered Accountant has informed us that we are required to deduct TDS for payments to non-resident companies under Section 195 of the Income-tax Act, even though they do not have a presence in India.

The other company is not proceeding further until they receive full payment.

I would appreciate it if all of your expertise could guide us on this as soon as possible.

Thanks in advance.

Regards,
Milesh

Yes, you would need to deduct tax at source in this case before making any payment to a foreign party, as the bank would not process the remittance unless accompanied by a CA certificate and proof of deposit of TDS.

Further, please also check with your CA about the applicability of service tax on this transaction, as he would know the facts of the case.

Thanks & Regards,

Avika Kapoor
Manager - Business Development
[Email Removed For Privacy Reasons]

Please check Section 9 of the Income Tax Act, 1961. If the income is accrued and earned in India, then TDS is applicable. Moreover, Double Taxation Avoidance (DTA) is also required to be checked. The contract with the party is relevant to make any final opinion.

Thanks,