Indian TDS Allocation (s.194J / s.206AA)

The parties acknowledge that Indian tax-deduction-at-source (TDS) obligations under the Income-tax Act apply to payers who are subject to Indian withholding requirements, and that whether and at what rate TDS applies depends on the identity and residency of the payer, the residency of the payee, and the character of the payment. Where a payment under or in connection with this Agreement is made by an Indian payer to an Indian resident payee for professional or technical services, TDS may apply (Income-tax Act s.194J), and the parties acknowledge that s.194J prescribes different rates for fees for technical services as distinct from professional services (2% for fees for technical services and 10% for professional/other covered services, as in force), and that the classification of the Services for this purpose is itself a matter for determination. Where a valid Permanent Account Number is not furnished by the payee, a higher rate may apply (Income-tax Act s.206AA, up to 20%). The parties shall correctly identify the direction of any payment and the applicable withholding before invoicing, and the payer shall issue the appropriate TDS certificate. For the avoidance of doubt, the United States Client is not, by reason of being located outside India, obligated to deduct Indian TDS on payments it makes to Vendor unless it is otherwise a person required to deduct under Indian law; Indian TDS is principally relevant to payments by Indian payers (for example, by Vendor to Vendor's own Indian subcontractors).