How to pay a foreign Service provider from India? What are the certificates and documents required?
One of the client took service of an US company. The service was consultancy in nature. The client being a startup have no much idea of the procedures to be followed and how to pay the money.
Even i am not much sure of international taxation and also the provision of Income Tax act regarding this.
Can someone help on this:
- How can one pay foreing service provider from India?
- What are the legal requirements to be fulfilled?
- What are the form to be submitted?
- How much TDS to be deducted?
The payment to any person who is not Indian and the payment is made out of India is governed by rules framed by FEMA and RBI.
The taxation part is managed by Income Tax Act.
The simple procedure to issue payments to foreign suppliers is:
- Get the form 15CB from a chartered accountant and upload Form 15CA on Income tax website
- Send the original form 15CB to bank and keep copy with you, Send copy of 15CA to bank
- 15CB and 15CA are filed with RBI and IT department.
- Tax is to be deducted on the payment, the rates of dedcutions are based on different situations.
TDS to be done at different rates based on different situations. The different rules for different rates are:
- If the payee have TRC and PAN, than TDS is to be deducted at 10% if payee is from USA. (Provisions of DTAA will be applicable)
- If payee does not have PAN but have TRC, TDS to be done at 20%.
- If Payee does not have TRC and PAN, the rate of TDS will be 40%.
Payment should be made only after deducting TDS.
Documents required by Chartered Accountant to issue form 15CB
The documents depends from case to case, but the general documents will be:
- Copy of TRC, PAN
- Copy of original agreement
- Invoice Copy