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I have a prospective Indian client on a reasonably big project (enough to warrant this question). India seems to have a 'TDS' tax on outgoing business payments of 21%, that is to say that any payments made from India to a foreign person or business are taxed at 21%. I am based mostly in Europe but am a director of a couple of companies in other countries.

Are there any effective ways of legally avoiding this? Can it be paid to holding company in another jurisdiction whereby this tax is not applicable or is there a type of tax efficient structure which minimizes this overhead which can be easily setup?

Thanks for any thoughts & advice.

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    I believe TDS means tax deducted at source, that is, withheld by the payer from the payment made to you and sent to the revenue authorities, and the only way to get it back is by filing an income tax return that (correctly) shows that you do not in fact owe any tax and therefore the amounts withheld should be refunded to you by the revenue authorities. Sep 10 '12 at 14:28
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Tax Deducted at source is applicable to Employee / Employer [contract employee] relations ... it was also made applicable for cases where an Indian company pays for software products [like MS Word etc] as the product is not sold, but is licensed and is treated as Royalty [unlike sale of a consumer product, that you have, say car] ...

Hence it depends on how your contract is worded with your India clients, best is have it as a service agreement. Although services are also taxed, however your contract should clearly specify that any tax in India would be borne by your Indian Client ...

Cross Country taxation is an advanced area, you will not find good advice free :)

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I am an Israeli based citizen who represents and Indian company who sells its products in Israel. As an agent I am entitled to commission on sales on behalf the Indian company who advised that.

Any commission paid to you will be applicable to TDS at 20.9% of the commission amount, the tax will be paid and a Tax paid certificate will be given to you. According to a Bilateral Double tax avoidance treaty if the tax has been deducted in India you will get credit for this tax in Israel.

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