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Query regarding payment for services rendered outside India
12-Sep-2025 (In Tax Law)
Good Evening
My company entered into an Agreement with a Vietnam based Company to execute an Event for us in Vietnam. It was agreed to make payment in USD.
Now the company is not providing Tax Residency Certificate and to avoid 35% TDS it is requesting to make payment in INR to an India based company.
Do you think it is appropriate as per Income Tax Act and FEMA regulations ?
If the Vietnam company does not give a Tax Residency Certificate, you must deduct 35% TDS. Paying to an Indian company in INR just to avoid TDS is not proper and may breach FEMA. The safe way is either to get TRC or apply for lower TDS certificate u/s 195/197. Any alternate payment route can create tax and FEMA violations for your company.
Helpful?
Dr Ajay Kumar Pandey
Delhi | 100+ Answers
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No, it’s not permissible. Payment must be made to the Vietnam company in foreign currency under FEMA. Without a Tax Residency Certificate, TDS under Section 195 (about 20%+) applies. Paying in INR to an Indian company to avoid TDS would violate FEMA and Income Tax Act provisions.
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Adv. Adarsh Kumar
Delhi | 400+ Answers
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