DTAA Between India and Japan

1) TDS ON PAYMENTS TO NON-RESIDENS (Section 195)-

Any person responsible for paying any sum to a non-resident, which is chargeable to tax under the Income Tax Act shall at the time of payment deduct tax at source at the rates in force.

Rates in force: (Section 2(37A) + Section 90(2))

  • Rate specified in the relevant Finance Act (or)
  • Rates specified in DTAA

Whichever is beneficial to the assessee.

2) DTAA BETWEEN INDIA AND JAPAN-

 Notification No. S.O.  1136(E), dated 19-7-2006, w.r.e.f. 28-6-2006.

ARTICLE 12: ROYALTIES AND FEES FOR TECHNICAL SERVICES

Royalties and fees for technical services arising in India and paid to a resident of Japan may be taxed in India at a rate not exceeding 10 per cent of the gross amount of the royalties or fees for technical services.

Rates as per DTAA includes all surcharges and Cess.

DTAA Between India and Japan

3) CREDIT OF TAX BORNE BY NON-RESIDENT-

ARTICLE 23: ELIMINATION OF DOUBLE TAXATION

Where a resident of Japan derives income from India which may be taxed in India in accordance with the provisions of DTAA, the amount of Indian tax payable in respect of that income shall be allowed as a credit against the Japanese tax imposed on that resident. The amount of credit, however, shall not exceed that part of the Japanese tax which is appropriate to that income.

4) CONCLUSION-

1. The Indian Company should deduct tax at the flat rate of 10 % (No additional Surcharge and Cess )
2. Such deducted amount can be taken as credit by Japanese company against their Tax Liability under Japanese Tax Law.

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