Hello All,
Ours is a JV with 60% holdings held by a Canadian Company and 40% held by an Indian Company.
We are intending to appoint a US national as our Marketing Executive for an approx salary of 5000 US$ plus 20% commission. We expect a turnover of around US $ 2 million per annum.from him.
While paying his salary and commission
1. Should I have to deduct TDS or Withholding Tax or not.
2. Is there any restriction under FEMA or FERA like maximum amount, etc.
Your replies will be highly helpful to us in arriving at a decision.

From India , Madras
Hi, Can you please tell me where the person will be providing his services, whether in US or India. Who will be responsible for paying the salary of that Individual, you or the US company.
From India , Delhi

As per the provision of the Income tax act, where the services have been provided in India are liable for deduction of tax at source, whether by a India resident or any other person. As per your case, the services are being provided by US Individual in US only, so there is no requirement of Deduction of Tax at source. Provided that the receipient of the amount will have to enter into an agreement of provision of services to the Indian Company.

This amount of commission and salary can be remmitted to US Individual properly supported by a practicing Chartered Accountant certificate, certifying the amount and the legality of transaction. For this you need to substantiate the transaction with the help of service agreement and confirmation from the receipient of services for provision of services.

Othe the other hand, your holding compnay can obtain the services from the US Individual and you can obtain a reimbursement invoice from the parent comapany and on that basis can remmit the amount to the parent company. In this case your parent company will have to pay the US individual and you will have to reimburse the amount ot the parent company.

In the second case, there will be no liability for deducton of tax at source if it is established that no profit margin is being added by the parent company in the reimburseable amount.

I will prefer the second option as the liability to prove the genuineness of the transaction is very good as compared to the first option.

As per the provision of Foreign Exchange management act, the payment outside India of an amount for which a company is liable to pay a country outside India is fully permissible and there are no restrictions on it. But a chartered accounts certificate is required in this regard. The certificate will be issued in form no 15CB and there after a form 15CA will be submitted online to the authorities.

Tn case of any other clarification, please feel free to revert.

Thanks and Regards

Rishu Gupta

From India , Delhi
Hi Rish,

Thanks for your detailed reply. I have filed the Form 15CA online and got the Form 15CB from our auditors and submitted the same with Form A2 on 20th of Jan. But just today only the payment was effected by the ICICI bank.

Normally how much time will it take to effect the wire transfer. I was told within 24 hours the wire paymnet would be sent.



From India , Madras
First, let us assume there is a branch co. of yours in USA too and the US national is appointed to work from there only. Also his salary disbursement is also being taken care by you USA branch then USA local laws should be applicable and your USA branch need to follow their local rules only.
Otherwise you need to deduct withholding tax on his salary here from India while remitting his salary/commission to him outside India.

From India , Delhi

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