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TMI BlogTDS on reimbursement cost to Foreign Holding companyX X X X Extracts X X X X X X X X Extracts X X X X ..... TDS on reimbursement cost to Foreign Holding company X X X X Extracts X X X X X X X X Extracts X X X X ..... dSUN: The Reply: In most cases, TDS (Tax Deducted at Source) is not required to be deducted on a pure reimbursement of expenses, provided the following conditions are met and well-documented: ✅ Conditions Where TDS Is Not Applicable: * Pure Reimbursement: * The Indian subsidiary is simply reimbursing the exact AWS cost incurred by the holding company, without markup or profit. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Invoice & Agreement Clarity: * The original AWS invoice should clearly be in the name of the Indian subsidiary (or at least show usage attributable to it). * A proper inter-company agreement should exist stating the reimbursement nature and cost-to-cost recovery. * No Services Rendered: * The holding company is not providing any service or adding value - only paying on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidiary. * No Withholding Tax in Nature: * The expense being reimbursed (AWS) is not itself subject to withholding tax in India. AWS typically provides cloud services, which may fall under Royalty / FTS (Fees for Technical Services) under Indian tax law if paid directly to AWS by an Indian entity. ⚠️ When TDS May Be Applicable: * If the AWS invoice is in the name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the holding company and not the Indian subsidiary, the Indian tax authorities may view it as a service provided by the holding company to the subsidiary - making it liable for TDS under Section 195. * If there is any markup or fee added (even administrative), then it becomes a service transaction, and TDS applies. * If the AWS payment would have attracted TDS (e.g., if the Indian subsidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary paid AWS directly), then the reimbursement may still attract TDS, unless exemption is obtained or tax treaty benefits are applied properly. 💡 Recommended Action: * Maintain strong documentation, including: * Inter-company agreement * Breakdown of cost (no markup confirmation) * Original AWS invoices * Proof that services were for the Indian subsidiary * Conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r obtaining a CA Certificate or tax advisor opinion to support the non-deduction of TDS. X X X X Extracts X X X X X X X X Extracts X X X X
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