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Section 195: TDS on Other Payments Made to NR (Individual) or Foreign Company

Who is required to deduct TDS u/s 195?

Any person (resident or non-resident) who pays any sum other than salary to a non-resident is required to deduct TDS tax under this section.

What is the rate & time of tax deduction u/s 195?

The rate of tax deduction u/s 195 shall be either of the below rates whichever is beneficial to you :

  • Specified in the Double Taxation Avoidance Agreements between India and the country of the payee.
  • Specified in the Income Tax Act.

Further, if the payee doesn’t have a PAN then rate could be rate as per the law in force or 20% whichever is higher.

No Requirement of TDS

No such exemption is provided in this section.

Frequently Asked Questions

Q- What is the conditions & procedure to avail DTAA benefit by NR?

Ans. DTAA is an agreement between the 2 countries. This agreement provides benefit that the income is taxed once. The assessee has to file form 10F and self declaration to person responsible for deducting tax.

Q- Section 195 an IT company has to pay professional fees to a company based in the USA which doesn't have any permanent establishments in India nor a PAN card, at what rate TDS should be deducted?

Ans. As per the section 195 where payee does not have a valid PAN then TDS rate is the rate prescribed under chapter XVII B or 20% whichever is higher.

Q- Can I pay 1% TDS under section 194IA for purchasing a property from an NRI?

Ans. Tds on purchase of property from non resident is deducted in section 195. When purchase on property from non resident tds is deducted on capital gains not on the sale prices .

Q- Under which section is tax withheld on sitting fees to a non-resident director of an Indian company?

Ans. Section 194J for resident payee and Section 195 for non resident payee

Q- What will be the head under which the income from dance performance will be shown as per the Income Tax Act, 1961?

Ans. If the main income is income from dance performance than income is shown in profession and if main income is other than income from dance performance then income shown in other sources.

Q- What is Tax residency certificate and how & where to get that?

Ans. Tax residency certificate is required from the resident country tax authorities to claim relief under DTAA

Q- Do I need a TAN to pay TDS under Section 195 while buying a property from an NRI?

Ans. TAN is necessary to deduct TDS. you must apply for the TAN.

Q- What are the details should contains in TRC?

Ans. The following details shall contains in TRC

  • Name of assessee
  • Status of assessee
  • Nationality of assessee
  • Residential status
  • Period for which the certificate is applicable
  • Address of applicant for the period for which the certificate is applicable

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CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.