Q.1. What is TDS?
TDS or Taxes Deducted at Source is income tax reduced from the money paid at the time of making specified payments (which includes royalty payments to Non-resident), thus the recipient of income receives the net amount.
Q.2 Why TDS (Tax deducted at Source) is not applicable on Freshworks Inc Payments from India Customers?
The Supreme Court of India held, in the case of Engineering Analysis Centre of Excellence Private Limited (Civil Appeal Nos. 8733Ͳ8734 of 2018 SC), that the payments made by resident Indian end users or distributors to non-resident computer software manufacturers or suppliers, as consideration for the resale or use of computer software through End User License Agreements or distribution agreements, is not a payment of “royalty” for the use of copyright in the computer software, and the same does not give rise to any income taxable in India.
Q.3 What are the documents to be provided by Freshworks Inc to customers?
Freshworks Inc will provide the following on an annual basis as requested
Tax Residency Certificate (TRC)
A Tax Residency certificate (TRC) is a letter printed on U.S. Department of Treasury stationery issued by the Internal Revenue Service (IRS) that certifies that the entity listed is a resident of the United States for purposes of U.S. taxation for the year indicated on the form. To take advantage of tax treaty benefits and reduced withholding rates, it may be necessary to provide a certificate of U.S. tax residency issued by the IRS.
Form 10F establishes the identity of Freshworks Inc, that entity is a non-resident of India and is paying taxes in the country of residence.
No -Permanent Establishment(No-PE) Declaration
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