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4.8 Star User RatingThe Tax Deducted at Source (TDS) for non-resident nationals of India is governed by section 195 of the Income Tax Act, 1961. This section focuses on the tax deductions and rates that are involved in a non-resident citizen of India's day-to-day business dealings. Section 195 of the Income Tax Act applies to all types of income other than salary. The legislation creates a mechanism to offset revenue loss owing to a foreign resident's tax burden by deducting an equal amount from their payments at the source.
Any person (resident or non-resident) who pays any sum other than salary to a non-resident not being a company or to a foreign companyis required to deduct TDS tax under this section. The payer can be any individual, HUF, Partnership Firms, other NRI’s, a foreign company, firms, and any juridical person irrespective of whether that person has income chargeable to tax in India or not.
The rate of tax deduction u/s 195 shall be either of the below rates, whichever is beneficial to you:
Surcharges and education cess must be added to the rates provided by the Act at the relevant rate. There is no need to add a surcharge or education cess if the payment is done according to DTAA rates. The following are the rates:
| Particulars | TDS rates |
|---|---|
| Income in respect of investment made by an NRI | 20% |
| Income by way of long term capital gains in Section 115E in case of an NRI | 10% |
| Income from long-term capital gains from listed shares specified u/s 112A | 10% |
| Short Term Capital gains under section 111A | 15% |
| Other income from long-term capital gains | 20% |
| Interest payable by the government or Indian Concern on money borrowed in Foreign Currency | 20% |
| Royalty & fees for technical services payable by Government or an Indian entity | 10% |
| Any other income | 30% |
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.
DTAA is an agreement between the 2 countries. This agreement provides a benefit that the income is taxed once. The assessee has to file form 10F and self-declaration to the person responsible for deducting tax.
As per section 195 where the payee does not have a valid PAN then the TDS rate is the rate prescribed under chapter XVII B or 20% whichever is higher.
TDS on purchase of immovable property from non-resident is deducted in section 195. When immovable property is purchased from non-resident then TDS is deducted on capital gains, not on the sale prices.
Section 194J for resident payee and Section 195 for non-resident payee
If the main income is from dance performance then income is shown in the profession and if main income is other than dance performance then income is shown in other sources.
Tax residency certificate is required from the resident country tax authorities to claim relief under DTAA
Yes, TAN is necessary to deduct TDS. You must apply for the TAN.
The following details must be there in TRC
