Navigating TDS on Foreign Remittance: How to Handle Currency Fluctuations and Tax Queries?

Kindly clarify a company doing placement consultancy in foreign countries. The invoice was raised during the month of May 2015, but we received payment in June 2015 (the currency value fluctuates over time), and we received bank remittance based on the current currency value.

a. Should TDS be deducted based on the invoice amount or the remittance amount in the bank?
b. What is the rate of TDS and ECESS?
c. Is section 194J of the Income Tax Act applicable in this case?

Hi,

TDS will be deducted on the Invoice Amount. Generally, the rate of TDS is 10% under section 194J of the Income Tax Act, which is for Professional services, and it is correct.

I have a few queries:
- Are your customers from India?
- Do they have their own office in India?
- Do they have an Indian TAN number to deduct and deposit Tax?

If the answer is yes to the above queries, then everything is fine. Otherwise, please share more information so that we can help you understand it better.

You are doing placements for foreign companies. You are raising bills and getting paid. TDS deduction is the responsibility of the person paying you. It is not your responsibility to handle TDS. If the client pays you without deducting, you do not have a problem. A foreign company that does not have a place of business in India is not covered under the TDS rules for payments made directly by them to you.

We are raising a bill for the placement we did in an outside country. For example, if we placed a person in Oman on 13/05/2015, we raised the bill for 100 Omani rial on the same day and sent it to the client. The calculation is as follows: 100 Omani rial x 165 Indian rupees (rate on 13/05/2015) = Rs. 16500. However, we received this payment during the month of June 2015 via bank transfer. The calculation then becomes: 100 Omani rial x 170 Indian rupees (rate on 14/06/2015) = Rs. 17000.

Now, the point of consideration is whether TDS should be calculated on Rs. 16500 or on Rs. 17000.

We are raising a bill for the placement we did in an outside country. Suppose we placed a person in Oman on 13/05/2015. We raised the bill for 100 Omani rials on the same day and sent it to the client.

100 Omani rials x 165 Indian rupees (rate on 13/05/2015) = Rs. 16500. However, we received this payment during the month of June 2015.

100 Omani rials x 170 Indian rupees (rate on 14/06/2015) = Rs. 17000. Now the question is whether TDS is calculated on Rs. 16500 or Rs. 17000.

That's the whole point, Mohan. There is no TDS. It's not your responsibility as the payee to deduct or pay TDS. It's the responsibility of the payer. So if he has not deducted TDS (it's not a requirement in Oman and he is not in India), he does not need to deduct.

We recruit from India for our operations in Africa and Southeast Asia. We never deduct TDS since it is not a statutory requirement in the countries where we operate. The consultant makes the payment of taxes to the government on the amount received as fees. Neither are we charged service tax since Indian consultants are exempt from service tax for foreign income.