Section 92B TDS: Why International Transactions Matter in Business

Key Takeaways
 

• Section 92B defines international transactions between related parties located in different countries under Indian tax law.
   
• 92B TDS is relevant in transfer pricing cases where cross-border payments are examined for fair pricing and correct taxation.
   
• Salary income is taxed separately under Section 192, which answers “how much TDS is deducted on salary per month”.

When an Indian company pays money abroad, tax rules change. Read further if your business deals with foreign group companies without realising the tax impact.

Section 92B of the Income Tax Act explains what qualifies as an international transaction between associated enterprises. International transactions include the purchase or sale of goods, the provision of services, the lending or borrowing of money, and cost-sharing arrangements as per the Income Tax Act. 

These rules help the tax department ensure that profits are not shifted outside India unfairly.

For example, when an Indian company pays technical service fees to its foreign parent company, that payment falls under Section 92B and is checked under transfer pricing rules.

Bonus Tip: Businesses involved in international related-party transactions can reduce transfer pricing disputes by opting for Safe Harbour Rules or Advance Pricing Agreements (APAs). This provides pricing certainty and lower audit risk. Recent reports show increased use of APAs in India to avoid long tax litigation.

Where 92B TDS is actually applied? 

92B TDS is used in cases where payments are made to foreign associated enterprises and the transaction falls under transfer pricing rules.

Section 92B itself does not deduct tax. It determines whether other TDS provisions like Section 195 apply.

Section 92B helps identify international transactions so that the correct tax rules can be applied.

Who Should Report Under Section 92B?

Section 92B applies mainly to businesses that have international transactions with associated enterprises. This includes Indian companies, foreign companies with Indian operations, and entities involved in cross-border related-party dealings.

Section 92B mainly applies to businesses and specific international transactions.

What is the 92B TDS Rate?

The 92B TDS rate is not fixed in the Income Tax Act. Actual tax deduction depends on the nature of the payment and the applicable TDS section, such as Section 195.

Section 92B helps classify transactions, but does not set a deduction rate.

Is 92B TDS Deducted on Salary Income?

92B TDS on salary is often searched, but salary income follows a different taxation route.

Salary is taxed under Section 192, which applies only to employer-employee relationships. This separation ensures clarity between domestic employment income and cross-border business transactions.

The correct challan for salary income is selected under Section 192, and a 92B TDS challan is not used. The 92b tds nature of payment applies only to international business transactions and not to salary paid by an employer.

How Much TDS Is Deducted on Salary Per Month?

Section 192 must be followed to know how much TDS is deducted on salary per month.

Employers calculate the annual tax liability and deduct it evenly over the financial year.

The tax slabs, deductions, and tax regime selection are the factors affecting TDS. Salary TDS is structured and is unrelated to Section 92B.

What Happens If Section 92B Rules Are Not Followed?

It is important to follow Section 92B rules on time for businesses involved in international transactions.

• Businesses involved in international transactions must maintain proper transfer pricing documents as required under the Income Tax Act.
• Incorrect reporting of transactions covered under Section 92B can lead to adjustments by tax authorities during assessment.
• Failure to maintain or submit required documentation may result in penalties under transfer pricing provisions.
• Delayed or incorrect filing can increase audit and lead to longer tax proceedings.

Avoid penalties, repeated audits, and unnecessary legal issues by following Section 92B rules correctly and on time.

Conclusion

Section 92B explains how international transactions between related parties are identified under the Income Tax Act. It helps apply transfer pricing rules and works with other TDS sections where required. Salary income follows Section 192 and remains separate. 

FAQs on 92B TDS

1. Banks deduct 30% TDS on international payments. How do exporters deal with this under Section 92B?

Section 92B helps identify international transactions, but banks usually deduct TDS under Section 195 for foreign payments. In many cases, banks apply a standard higher TDS rate when documents are missing. Exporters usually claim the extra TDS as a refund while filing their income tax return.

2. Will freelance income attract TDS under Section 92B, and where can TDS details be checked?

Section 92B applies only if the freelance income comes from an associated foreign enterprise. Otherwise, freelance income is taxed under regular TDS sections like Section 194J or Section 194C. TDS details can be checked in Form 26AS or the Annual Information Statement on the Income Tax portal.

3. What is the difference between Section 92A, 92B, and 92C, and does Section 92B apply to railway pension challans?

Section 92A defines associated enterprises, Section 92B defines international transactions, and Section 92C explains arm’s length pricing. These sections apply only to international business transactions. Central Railway pension payments are not covered under Section 92B and follow pension and salary TDS rules instead.

4. What is the TDS rate on prize money from an international tournament under Section 92B?

Section 92B only helps classify the transaction as international. The actual TDS rate on international prize money depends on the nature of income and applicable sections like Section 115BBA or Section 195. The final rate may also depend on tax treaties.

5. Does Section 92B apply if an Indian company pays its foreign group company for software services?

Yes, Section 92B applies because the payment is an international transaction between associated enterprises. The transaction must follow transfer pricing rules, and TDS is deducted under the applicable section, such as Section 195, not directly under Section 92B.