• TDS & other complications on foreigner salary

Hello,

I own a Private Ltd company who does digital marketing using a set of websites that we own and operate. We intend to hire 3-4 US experts to manage our websites' content requirements (includes content writing, editing, replying to comments, and other content related works) and intends to pay them a monthly salary through SWIFT transfer. Monthly salary range might be in the range of $500-$1500 depending on how much effort, in average, is required from each employee to manage the sites' content requirement. 

How much in TDS would we need to deduct? Except TDS, are there any other compliances?

Is there any GST implications? We hope the "employer-employee" relationship is clear in this case, even though the payment we do might be lesser when seen in US salary standards.
Asked 18 days ago in Income Tax

Are you going to hire them as your employee or as third party experts?

If you are going to hire them as employees and if they will work form outside India then no TDS and GST needs to be paid.

 

If you hire them as third party service provider then you might have to deduct TDS depending of different nature of services and we need to check agreement of each kind of services.

Further, GST also might be required to be paid under reverse charge if you wish to hire them as third party experts as it will be import of service.

 

So as you are saying if are legally comply with all requirement to establish an employer employee relationship then you might not be required to deduct any TDS or pay any GST.

 

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

Thank you.

Naman Maloo
CA, Jaipur
4026 Answers
64 Consultations

5.0 on 5.0

TDS to be deducted on this salary u/s 192 of the Income Tax Act, 1961.   

You will have to take GST registration if your aggregate annual turnover exceeds Rs. 20 Lakhs or Rs. 10 Lakhs(for special category states). 

No GST implication will arise on this salary payment to foreigners. In the absence of an employer-employee relationship, the GST taxation would have been different. 

Puja Sharma
CA, Jaipur
33 Answers

Not rated

- Instead of Salary it would be treated as Fees for technical services. You are liable to deduct TDS u/s 195 subject to DTAA between India and USA. Article 12 of DTAA is applicable.Rate of TDS under Income tax Act (i.e. Section 195) is 10.4%. To avail the benefit of concessional TDS rate, remitee should submit TRC of the resident country. The foreign supplier of services should raise proper invoice in the name of your Pvt. Ltd. company. Company is also liable to pay GST as it is an import of services and can claim the ITC for such GST payment on paid basis. Pvt. Ltd company is liable to file Form 15CB and 15CA against each foreign remittance. 

 

For detailed discussion, you may opt for phone consultation.

Vivek Kumar Arora
CA, Delhi
4432 Answers
549 Consultations

5.0 on 5.0

Hi,

 

If it is employer-employee relationship, then TDS would be as per slab rates applicable to the employee. There would not be any GST.

 

However, since you mentioned that the salary might depend on effort, it suggests professional fees and not employment. In that case TDS would be deducted u/s 195. Remittance certificates would be required in Form 15CA-CB. GST would have to be paid on reverse charge basis. 

 

For detailed consultation please reach out. 

 

Regards

Prerna Peshori
CA, Pune
60 Answers

5.0 on 5.0

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