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Old 3rd May 2014, 00:01   #481
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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Originally Posted by faustus77 View Post
TorqueyTechie
Hi
You can call the numbers, and verify the bonafides.
You can also call the State Bank Of India helpline (toll free no 18004259760) who handle the actual payment.The payment is made by them after the refund orders are passed.Takes about 8/10 after the order is passed and your receiving the credit in your bank account.
Regards
Thanks faustus. I will try doing it on monday.
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Old 22nd May 2014, 12:48   #482
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I have a bit complicated income tax query about TDS.

My company does their worldwide sales from USA. We have made sales to many countries and never had any major complication in taxation. Then we made a sale to India... and our woes began.

India has the concept of TDS (tax deducted at source), when a company makes payment to just anybody. This applies to foreign payments too. The TDS rates differ based on documentation presented. If the foreign company presents Indian PAN card, no-PE declaration and TRC (Tax residency certificate), the TDS will be just 10.5% only. If any of the document is missing, the TDS could be 25% or even 40%.

We have presented the 2013 TRC along with the rest of the documents. But the customer's accountant is demanding 2014 TRC. But here is the problem.
  • In USA, the official tax filing deadline is April 15th every year. One has to file tax returns or file for an extension by April 15th.
  • A company can apply for TRC for that year only after filing returns or filing extension. It takes 30-45 days to get the TRC issued, and there is no way to expedite the process. That means no US company can have their current year TRC before June.
Therefore, if every Indian customer insists on current year TRC, no USA company can get payment from India until June. This can't be right. No US vendor will do business with India under such circumstances. This just doesn't seem logical.

I checked with 2-3 accountants and nobody has any clarity on TRC since they don't deal with it.

So I have couple questions here:

1) Has Indian Government really created a law that deducts full TDS for US vendors for the first 5-6 months of every year? Why will US do business with India in the first half of the year then?
2) If the 25% or 40% TDS is done, can the vendor get credit from IRS for that full amount once he receives his TRC for the year?

PS: To add bit more clarity, the item sold happens to be software license. TDS is not usually done for products, but only on services. However, most accountants in India treat software as service than product. But the GOI has released a circular in 2012 clarifying the matter.

Look at section 5.4.4 in the following document: http://www.cbec.gov.in/ub1213/do-jstru2.pdf

Software license is a sale of goods with transfer of right to use. Therefore, it is a product, not a service. They should not deduct TDS at all in this case.


Edit: It is resolved. The customer's CA agreed there can't be TDS since it is sale of goods, according to section 5.4.4 clause. And last year's TRC is acceptable as long as we provide the new TRC when it becomes available. What a relief!

Last edited by Samurai : 22nd May 2014 at 14:27. Reason: update
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Old 22nd May 2014, 14:33   #483
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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I have a bit complicated income tax query about TDS.

So I have couple questions here:

1) Has Indian Government really created a law that deducts full TDS for US vendors for the first 5-6 months of every year? Why will US do business with India in the first half of the year then?
2) If the 25% or 40% TDS is done, can the vendor get credit from IRS for that full amount once he receives his TRC for the year?
Your question is very interesting and thanks that you clarified the nature of sales later. When I first read the post I was not sure what "Sale of Goods" is attracting TDS in the country but saw the details later. Your judgement on the Indian "Accountants" was also funny, but they are forced to take a very conservative approach only because of the Indian laws.

The circular referred by you pertains to Service Tax Act and you are discussing about taxation under section 195 of the Income Tax Act, so let us not mix the several Acts prevalent in this country. Under the guidance of the RBI (again under the FERA & FEMA) this sale of software is categorised under "Professional & Technical Services" and TDS is deducted under section 195 of the IT Act.

This may be immaterial now, but you should know that section 195 of the IT Act allows the payer (purchaser) to bear the tax and 99.99% of the exporters that I've seen uses this provision to avoid all the hassles of taxation laws.

Sub section 4 of Section 90 of the IT Act prescribes for submission of TRC in the prescribed format mandatory for availing tax concessions under the DTAA agreements. Clause VII of the format asks for the period for which the certificate is applicable. In case the FE transaction has happened within this prescribed period, it should be sufficient.

About the refund procedure, I have no knowledge.

Hope I'm able to clear some of the doubts.
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Old 23rd May 2014, 18:49   #484
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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The circular referred by you pertains to Service Tax Act and you are discussing about taxation under section 195 of the Income Tax Act, so let us not mix the several Acts prevalent in this country.
I specifically used the 2012 circular about service tax to prove that GOI considers sale of packaged software license with transfer of right to use it as sale of goods. Otherwise service tax comes into the picture.

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Under the guidance of the RBI (again under the FERA & FEMA) this sale of software is categorised under "Professional & Technical Services" and TDS is deducted under section 195 of the IT Act.
What kind of software? Packaged software isn't a service, only made-to-order software is a service. As a long time software professional, I am acutely aware of the difference between two. During billing, licenses are listed under material, while professional services (installation/custom development/integration) are listed as services. This is a worldwide standard.

Last edited by Samurai : 23rd May 2014 at 18:55.
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Old 24th May 2014, 11:09   #485
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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What kind of software? Packaged software isn't a service, only made-to-order software is a service. As a long time software professional, I am acutely aware of the difference between two. During billing, licenses are listed under material, while professional services (installation/custom development/integration) are listed as services. This is a worldwide standard.
Taxability of cross-border software payments has long been a subject matter of litigation in India, owing to reasons such as:
#Interpretation of the definition of “royalty” under the Income-tax Act, 1961
#Differences in the definitions of “royalty” under the Act and in Double Taxation Avoidance Agreements, and
#Divergent judicial precedents.

The Finance Act, 2012 brought in some important amendments to the Act which expanded the scope and coverage of the term “royalty.” The disconnect between the ITL and the DTAA were set to rest by Mr. Chidambaram in his 2012 budget speech.

The Finance Act, 2012 inserted the following explanations in section 9(1)(vi) with retrospective effect from June 1, 1976 :
• Explanation 4: The transfer of all or any rights in respect of any right, property or information (under the definition of “royalty”) to include transfer of all or any right for use or right to use computer software (including granting of a license) irrespective of the medium through which such right is transferred.

Thus, such purchases are subject to a withholding tax under section 195 of Indian Income Tax Act that was fixed at 10 percent of the gross purchase amount earlier but now raised to 25 percent w.e.f. 01-04-2013.
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Old 24th May 2014, 19:29   #486
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

What if I put software on a pen drive, and sell pen drive with special unique logo of my company costing 20,000$
Then its a product, right?
So cost of software license - 20$
Cost of pendrive - 40$
Cost of company logo = 20,000$

Problem solved? Or not?
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Old 25th May 2014, 15:09   #487
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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Taxability of cross-border software payments has long been a subject matter of litigation in India...
.
.
• Explanation 4: The transfer of all or any rights in respect of any right, property or information (under the definition of “royalty”) to include transfer of all or any right for use or right to use computer software (including granting of a license) irrespective of the medium through which such right is transferred.
This interpretation is only for paying foreign vendor, or even local vendors?

If you buy Tally licence, do you deduct 25% TDS?

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Thus, such purchases are subject to a withholding tax under section 195 of Indian Income Tax Act that was fixed at 10 percent of the gross purchase amount earlier but now raised to 25 percent w.e.f. 01-04-2013.
If you do 25% TDS to a foriegn vendor, can he get tax credit for that from his government assuming DTAA is in place? If the foreign vendor provides Indian PAN, TRC and no-PE letter, will the 25% go down to 10%?
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Old 26th May 2014, 09:56   #488
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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Originally Posted by Samurai View Post
This interpretation is only for paying foreign vendor, or even local vendors?

If you buy Tally licence, do you deduct 25% TDS?

If you do 25% TDS to a foriegn vendor, can he get tax credit for that from his government assuming DTAA is in place? If the foreign vendor provides Indian PAN, TRC and no-PE letter, will the 25% go down to 10%?
This interpretation was exclusively for Imports; I thought your company was located in US and was discussing the laws accordingly, kindly forgive if I'm wrong.

The TDS rate as per IT Act is 25% and if the foreign company provides all the required documents then the TDS is deducted as per the rate provided in IT Act or the DTAA rates, whichever is lower.

Last edited by Sommos : 26th May 2014 at 09:59.
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Old 26th May 2014, 10:35   #489
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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This interpretation was exclusively for Imports; I thought your company was located in US and was discussing the laws accordingly
Yes, it is.

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The TDS rate as per IT Act is 25% and if the foreign company provides all the required documents then the TDS is deducted as per the rate provided in IT Act or the DTAA rates, whichever is lower.
We have provided all the required documents, where do we find that applicable rate?
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Old 26th May 2014, 12:55   #490
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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Yes, it is.

We have provided all the required documents, where do we find that applicable rate?
The DTAA agreements are all available in the net in the site Incometaxindia.gov.in.

Please see the link (DTAA between India & US) for the full agreement between India and USA.
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Old 26th May 2014, 14:57   #491
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

Phew! http://law.incometaxindia.gov.in/Dir...dta/A1_USA.htm

If I can understand that, I can probably apply for an accountant's job. I was unable understand that.
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Old 27th May 2014, 15:40   #492
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

@Samurai; Obfuscation is a speciality of our babus. I would have been surprised if it was understandable.
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Old 8th June 2014, 23:53   #493
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

Hi everybody.
I have been reading reports about assesses receiving notices and being asked about clarification on capital gains,which are free on shares if held for more than 1 year and STT paid when sold. In spite of that notices sent.
My CA showed me a notice for clarification on a capital transaction of rs 20000 to one of his clients.A transaction of rs 20000 is a very small amount(you cant even buy 10 shares of TCS).Also a transaction may or may not result in a profit.
Are there any gidelines issued to the ward officers for sending notices? Any idea?
Thanks a lot.
Regards
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Old 9th June 2014, 12:09   #494
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Any idea about when ITR4 will be available. I downloade and started filling ITR4S for my son, but by the looks of it, it may be more like ITS1 in that non-taxable income cannot exceed Rs.5k.

Also, I find setting the path everytime I load Win 8.1 a pain. Anyway of doing it permanently. The Java utility must have been developed to avoid conflicts with MS Office, and to meet the Linux demands. Still a pain sinced to set the country to India you must scroll down the entire list, etc. Obviously Generation 1 product.
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Old 9th June 2014, 12:28   #495
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Default Re: All Income Tax Queries (refunds, disputes, rates etc...)

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Any idea about when ITR4 will be available. I downloade and started filling ITR4S for my son, but by the looks of it, it may be more like ITS1 in that non-taxable income cannot exceed Rs.5k.

Also, I find setting the path everytime I load Win 8.1 a pain. Anyway of doing it permanently. The Java utility must have been developed to avoid conflicts with MS Office, and to meet the Linux demands. Still a pain sinced to set the country to India you must scroll down the entire list, etc. Obviously Generation 1 product.
I have been using ITR 2 for the past 5 years, not sure why I did not use ITR 1. Perhaps it was due to house loan interest waiver that was not available in ITR 1 way back in 2009.

But when I chose the option of quick filing today, I could see only ITR 1 and ITR 4S in the drop down list, and no other forms. So it looks like I have to use my old ITR 2 and clone it to this assessment year. Let me see how it goes.

I was also compelled to a higher version of java runtime as the one on my laptop was a version lower.

This is just an FYI. I'll update this thread after I complete the process. It has never been easy to match the columns and rows in Form 16 to those in the ITR.
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