Hello,

My resident status is Non-Resident. I want to setup a proprietorship in India, also want to open a Current account. I have no intention to repatriate the money earned here

I will have a contract with an Indian company and I will be billing to Indian company for the services I will be providing outside India

What I wanted to know is how much TDS will be withheld when my client releases the payment to me? (Whether it is 10% or 40%?) and the basis (which section) for TDS 

Yous answer will be much appreciated, Thank you

Dear Madivalayya,

Rate of TDS on payment to a Non-Resident depends on various factors e.g.

1)  What is the nature of transaction?

2) Does India have treaty with the country of Non-Resident? If yes, what is the rate as per treaty?

3) Does Non Resident have a PAN in India?

4) Whether income is accrued or received in India?

Many facts are missing in your query. However as per details mentioned by you, below is our opinion based on certain assumptions.

a) Since you are a Non-Resident in India, therefore section 194J is not applicable and Section 195 will be applicable for deducting TDS.

b) Since you will be receiving payment in India, therefore income is chargeable to TDS u/s 195, irrespective of the fact you are providing services outside India.

c) Assuming you already have a PAN in India or will apply before actual transaction.

d) Assuming this service falls under "Fees for Technical Services" - Rate of TDS will be 10%.

Pl note that Surcharge and Education Cess are also applicable, unless TDS is deducted under DTAA relief. 

Please note that the above opinion is based on certain assumptions, in the absence of complete facts. Please feel free to revert if you need more clarification on the same.

Kind Regards
Mohit Jain
TaxReply.com

You have to come with full facts before anybody can comment. If you are a non resident what is a need to have a prop company in India and who will manage it ?

Thank you for your reply

The nature of transaction is - I will be providing programming services in Automotive sector to the client(located in India), the place of rendering service will be outside India, so I will be raising Invoices for these services(I do not know if this exactly answers your question of nature of transaction)

Yes India has DTAA with my country of Residence

I have PAN in India

I do not know if the income is accrued or received in India in this case

I have no intention to repatriate the income earned from India, I want the payments to be made here in Indian account(current account)

I will be able to manage the proprietorship as I am travelling to India quite often

Thank you

Not able to understand why you require to set up a prop concern in India , when the work is to be done from abroad.and you will be doing the work from abroad.

Dear Madivalayya,

Pl let me know your country name for checking the rate of TDS in relevant DTAA?

Further please note that, if you do not form Prop. firm and do not receive payment in India, then TDS may be avoided.

Kind Regards
Mohit Jain
TaxReply.com