What is Grossing up of TDS?
Nexa Consultancy | Startup & Finance Glossary
When a contract requires a payment to be made "free and clear of any taxes," the payer must "gross up" the payment. This means calculating the TDS on an amount such that the net payment to the recipient equals the agreed-upon sum.
Startup Example: A startup agrees to pay a foreign consultant $10,000 net of taxes. If the TDS rate is 10%, the startup must calculate the payment on a grossed-up basis ($10,000 / (1 - 0.10) = $11,111), deduct $1,111 as TDS, and pay the consultant $10,000.
We handle these complex calculations in our foreign payment services.