• Taxes for paying Nigerian freelancer

We run a partnership firm. We are engaging couple of Nigerian freelancers for providing us with services (content and code writing). Those freelancers will be paid from our Corporate Account of Axis Bank using Trade Connect online. The software asks for TDS rate and TDS amount. My questions are : 

1. What shall be rate and amount for content and code writing? They are freelancers, not permanent employees. 
2. Assume we have to pay them INR 1000. Now at 10%, TDS is INR 100. Now they are not supposed to get INR 900. They want INR 1000 only. What is way so that they get what they are supposed to get, and whatever tax liabilities we have, we may fulfill that. 
3. Any other taxes need to be paid by us for this fund transfers? 
4. It also asks to submit 15 CA. We checked that this can be filled up from Income Tax portal, and then we may upload that to the bank. Are we missing something?
Asked 3 years ago in Service Tax

You actually need to deduct TDS @20% since they are non residents.

If you say they want ₹1000 and you will bear the tax amount then you need to show the payment amount as 1250 and then deduct 20% TDS and pay them ₹1000.

TDS and form 15CA are the only two things you need to take care of.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3915 Answers
52 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

-TDS rate should be 20% as they are non residents.

 

- Better do the reverse calculation for TDS.


- No other taxes for fund transfer.

 

Apart from that, form 15CA & 15CB would be required for reparation of funds.

 

Form 15CA needs to be filled only if the remittance is chargeable to tax in India. If remittance/payment is not chargeable to NRI then Form 15CA is not required.

 

A CA certificate (Form No. 15CB in this case) will be required to be furnished only in case of payments made to non-residents which are chargeable to tax and the amount of payment during the year exceeds Rs. 5 lakhs.

Payal Chhajed
CA, Mumbai
5136 Answers
194 Consultations

5.0 on 5.0

Hi

1. The rate shall be 20% since they won't have any PAN.

2. Suppose you make a payment of 1000 to them, make reverse calculation of of tax. 1250 shall be value of services received, 250 being 20% TDS.

3. If you are registered under GST, you need to pay GST in reverse charge on such import of services.

4. Yes, you need to file Form 15CA. Form 15CB shall also be required if payment exceeds 5 lacs.

Lakshita Bhandari
CA, Mumbai
5590 Answers
684 Consultations

5.0 on 5.0

Hi,

- It appears that Nigerain are Non-residents due to which DTAA will be applicable. For Non-residents, tax rates there are special rate of tax for which I need more information from you.

- You need to gross up the amount of net payment with the tax rate.

- If freelancers are NR, then it will be import of service and you need to pay tax on it under GST.

- You need to file Form 15CA and 15CB.

- Please call for further discussion.

 

Thanks

Vivek Kumar Arora
CA, Delhi
4279 Answers
428 Consultations

5.0 on 5.0

Hi

1.As payment to NR ,to be done after deducting TDS under sec 195,@20.6%

2.Do the Reverse calculation and and calculate the gross fig for payment.

3.No other taxes to be paid.

4.Yes you need to file 15CA and get 15CB from chartered accountant.

 

Hope it helps.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

 

Any payments abroad would qualify for TDS compliance and execution of form 15CA and CB. Since, the source of revenue for Upwork is in India, any income generated in India by Upwork is thus taxable, as normal. TDS would thus be applicable in this case as payment to a non-resident under section 195. I assume that this Nigerians would not have Indian PAN, hence TDS applicable at 20%. IN case they have PAN, TDS at 10%+surcharge +cess.  I have not commented on applicability of India-Nigeria DTAA. As it is complex and requires various documentation.

In case, you have to pay him them fix amount ie taxes are borne by you, you need to gross up the payments and deduct tax. In your example, for payments of 100, the actual amount on which tax (@10%) is levied is 111 (this is treated as Nigerian revenue).  The TDS applicable would be 11. You need to submit form 15CA and CB prior to making the remittance. You need to file the quarterly ETDS return for these payments to foreign parties.

Jasmina Jain Shah
CA, Greater Mumbai
447 Answers
4 Consultations

5.0 on 5.0

TDS gets deposited in the name of the freelancer. They can claim it in the country where they file the ITR basis on the residential status of the freelancer.

Vivek Kumar Arora
CA, Delhi
4279 Answers
428 Consultations

5.0 on 5.0

The TDS amount would be claimed by the freelancers when they file the return and claim the same.

Payal Chhajed
CA, Mumbai
5136 Answers
194 Consultations

5.0 on 5.0

You are the deductor you can't claim TDS amount the freelancer can claim the TDS amount in their country based on DTAA.

Thank you

Naman Maloo
CA, Jaipur
3915 Answers
52 Consultations

5.0 on 5.0

In my opinion same shall not be subject to TDS if you can plan and show it under business income for Nigerian freelancer.

 

I ca provide you its professional service for drafting necessary agreement and advising on its systems

Vishrut Rajesh Shah
CA, Ahmedabad
773 Answers
28 Consultations

5.0 on 5.0

No. You can't claim that TDS amount back as the TDS amount can only be claimed by the person whose TDS you have deducted and that too only if he has give his PAN to you and TDS is deducted against his PAN.

Lakshita Bhandari
CA, Mumbai
5590 Answers
684 Consultations

5.0 on 5.0

Hi

 

Yes tds paid can be claimed at time of return filling. 

 

 

Hope it helps 

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Yes, you can definitely claim deduction of that expenses paid abroad if Tds is paid to government properly. Also entire payment should be through banking channels 

 

 

Jasmina Jain Shah
CA, Greater Mumbai
447 Answers
4 Consultations

5.0 on 5.0

No, you cannot claim that TDS.

Priyank Kumar
CA, Agra
63 Answers

5.0 on 5.0

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