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Author Topic: TDS Deductions on Advertisement charges paid to a Foreign Company  (Read 7598 times)
Posts: 2

« on: September 26, 2008, 11:27:24 AM »

Dear All,

We are a Pvt Ltd company and must deduct TDS on all payments made on account of Advertisement expenses. However, if the advertisement provider is based out of India and has no permanent establishment in India, do we still need to deduct the TDS before making any payments to them? Please clearify this rule.

Thank you.
« Last Edit: September 26, 2008, 05:35:49 PM by TaxExpertMyTaxes » Logged
Full Member
Posts: 30

« Reply #1 on: September 28, 2008, 11:59:32 AM »

Under section 195 of the Income-Tax Act, 1961 any person responsible for paying a non-resident any sum chargeable under Indian tax law shall deduct income-tax thereon at the rates in force at the time of credit of such sum to the account of the payee or at the time of actual payment thereof, whichever is earlier.

Thus TDS is required to be deducted only if the income of the advertisement provider is chargeable under India tax law. This further depends upon if the income of the advertisement provider is received in India or accrued in India or deemed to be received or accrued in India (section 9). If payment is made outside India, then it is not received in India. If the advertisement provider provides the services outside India, then the income is not accrued in India.

The advertisement company's income does not fall under the provisions of section 9,
a. if the payment is made outside India,
b. the advertisement company does not have (or is not available)any fixed base in India, and
c. the advertisement company does not provide any services in India.

So no income tax is required to be deducted if the income of the advertisement provider does fall under the ambit of deeming provisions of section 9 of the IT Act.

Sr. Member
Posts: 223

« Reply #2 on: October 31, 2008, 01:45:59 PM »

Here is IT Act Section 9(1)
The incomes deemed to accrue or arise in India includes all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situated in India.

Section 9(1)(c): In the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India.
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