TAN

Hi

In case you are taking DTAA benefit and TDS is not deduct, you must receive TRC, Form 10F and certificate for no taxability in India from the service provider.

15CA would be required. 15CB would depend on certain other factors.

- As you have mentioned that Indian sole propertiorship firm has availed services from German company for software services. Software services are defined as "ROYALTY" under the Income Tax Act. Article 12 of India-Germany DTAA deals with tax on Royalty and FTS. In Article 12 of India - Germany DTAA, rate of tax is 10%. Under Article 12, it is not clearly mentioned that the right to use a computer software (including granting of licence) is a Royalty which creates a sense of treating the transaction to attract NIL TDS rate under DTAA. Recent Supreme court ruling is applicable on sale of computer software and not on right to use software services. In my opinion to avoid hardship in future it is better to deduct TDS as per Income Tax Act. Rate of TDS under Income Tax is 10.4% upto 1Cr payment.

- Apply for TAN, file Form 15CA and Form 15CB. 

- TRC is required to give the benefit of minimum tax deduction (between Income Tax and DTAA) which is usually DTAA tax rates as they do no contain surcharge and cess. If you want to follow DTAA without deduction of TDS, only TRC is required as TRC contains all information which is required in Form 10F.

- Form 15CA will be filed in all cases. Some remittances made under schedule III of FEMA (current account transactions) and which do not need RBI approval are exempt. In your case, both Form 15CA and Form 15CB is required. The purpose of Form 15CB is to ensure proper deduction of tax in India. As the transaction is chargeable to tax in India, Form 15CB is required if the remittance or aggregate of such remittances exceeds Rs. 5 lacs during a financial year. Part C of Form 15CA is applicable in your case and not Part D.

Note : If TDS is deducted though it is not required, deductee will take benefit of TDS deduced in India as Foreign Tax Credit while filing ITR in Germany (i.e. benefit of double taxation)

For detailed discussion, you may contact me telephonically.

Since Under DTAA TDS is not required to be deducted thus no need to obtain TAN.

Further it will be better if you get 15CA filed, part D of 15CA is supposed to be filed when payment made is not chargeable to Tax under IT Act. 

15CA would be required and 15CB might also be necessary depending on transaction.

Do you have TRC as you are taking DTAA benefit.

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

Thank you

Dear Sir,

Hope you are doing well !!

-For claiming DTAA benefits, TRC would be required.

-TAN is also not required because TDS is not required to be deducted. 

-Applicability of Form 15CA and Form 15CB :

• If the amount of remittance is not chargeable to tax, then no forms are required.
• If the remittance is covered under a specified exemption list, then only Part D of the Form 15CA is to be submitted.
• Where remittance is less than Rs. 5 lakh in a particular financial year – Only Form 15CA – Part A to be submitted.
• Where remittance exceeds Rs. 5 lakh – Form 15CA – Part C and Form 15CB to be submitted.
• Where remittance exceeds Rs. 5 lakhs and a certificate under Section 195(2)/195 (3)/197 of the Income Tax has been obtained – Form 15CA – Part B to be submitted.

We may discuss the issues further in detail.

In my opinion, under Article7 of DTAA Germany & India, Business income is taxed in the country of residence and accordingly, the software use income would be chargeable to tax in Germany.

Since income is not chargeable to tax, and, if RBI permission is not required, no form is required to be submitted. However, please take care to obtain Tax residency certificate from the German company.