Question 1

When is TDS under Section 195 required?

Accepted Answer

Section 195 requires any person making a payment to a non-resident (or foreign company) that is chargeable to tax in India to deduct TDS before remittance. This covers royalties, technical fees (FTS), interest, business income attributable to a PE, and capital gains. The obligation applies to all payers — including individuals and HUFs. Failure to deduct results in disallowance under Section 40(a)(i) and penalty under Section 201.

Question 2

What is a lower or nil deduction certificate under Section 197?

Accepted Answer

The non-resident payee or the Indian payer applies to the Assessing Officer in Form 13 for a certificate authorising TDS at a lower rate or nil. The AO examines DTAA applicability — if a treaty rate applies (e.g., 10% royalty rate vs. the standard 20% under Section 115A), the certificate is issued for that rate. Valid for the AY specified and must be given to the payer before payment.

Question 3

What TDS rates apply without a DTAA?

Accepted Answer

Default domestic rates under Section 115A: royalties and FTS — 20%; interest — 20%; dividends — 20%; LTCG on listed securities — 10% (Section 112A); STCG on equity with STT — 20% (Section 111A); other income — 30% for foreign companies or applicable slab for non-resident individuals. Surcharge and cess apply on top of these base rates.

Question 4

What are Form 15CA and Form 15CB?

Accepted Answer

Form 15CA is a declaration filed by the remitter on the income tax portal before a foreign remittance. Form 15CB is a CA certificate under Rule 37BB confirming TDS has been correctly deducted or the remittance is not taxable in India — required when remittance exceeds ₹5 lakh in a financial year and is not specifically exempt under Rule 37BB Part C. Banks will not process the outward remittance without the 15CB reference number.

Question 5

Can the lower deduction certificate be obtained in advance for recurring payments?

Accepted Answer

Yes — Form 13 is filed online on TRACES. The AO must issue or reject within 30 days. Obtained in advance for recurring payments (annual licence fees, software subscriptions, intercompany charges) so the payer deducts at the DTAA rate throughout the year rather than the higher domestic rate. Without the certificate, the payer must deduct at the full domestic rate and the non-resident claims a refund in the Indian ITR.

Section 195 Lower Deduction Certificate

Related Services

GST Registration

GST Returns Filing — GSTR-1, GSTR-3B

GST Compliance & Returns