The tax treatment is always special when it relates to a non-resident person. In the present article, we would look into the provisions with regard to the tax deduction at source on payment of any other sum to a non-resident. Provisions of tax deduction at source (TDS) with regard to payment of any other sum to a non-resident is covered under section 195 of the Income Tax Act, 1961 which are explained hereunder.
Section 195 states –
As per section 195 of the Income Tax Act, 1961, any person making payment to a non-resident (not being a company) or to the foreign company for the following payments is liable to deduct TDS –
- Any interest (except interest referred in section 194LB or section 194LC or section 194LD),
- Any other sum chargeable under any head of incomes (except income chargeable under the head ‘salary’).
Time of TDS deduction –
The Deductor is liable to deduct TDS within earlier of the following dates –
- At the time of payment in cash / draft / cheque or any other mode; or
- At the time of credit of income to the account of the Deductee.
Rate of the tax deduction –
| Sr. No. | Particulars | Rate of TDS |
| 1 | Income with respect of investment made by the non-resident | 20% |
| 2 | Income by way of Long Term Capital Gain (LTCG) referred in section 115E | 10% |
| 3 | Income by way of Long Term Capital Gain (LTCG) referred in section 112 (1) (c) (iii) | 10% |
| 4 | Income by way of Long Term Capital Gain (LTCG) referred in section 112A | 10% |
| 5 | Income by way of Short Term Capital Gain (STCG) referred in section 111A | 15% |
| 6 | Any other Long Term Capital Gain income [except Long Term Capital Gain referred in clause 10 (33), section 10 (36) and 112A] | 20% |
| 7 | Interest income payable by the Government / an Indian concern against money borrowed / debt incurred by Government / an Indian concern in foreign currency [except interest income referred in section 194LB or section 194LC] | 20% |
| 8 | Royalty income payable by the Government / an Indian concern in pursuance of an agreement where the royalty is in consideration for the transfer of all or any rights with regard to copyright in any book on the subject referred in section 115A (1A) of the Income Tax Act, to an Indian concern, or in respect of any computer software referred in second proviso to section 115A (1A), to a person resident in India. | 10% |
| 9 | Royalty income payable by the Government / an Indian concern in pursuance of an agreement with the Government / an Indian concern (agreement with an Indian concern should be approved by the Central Government) | 10% |
| 10 | Fees for technical services payable by the Government / an Indian concern in pursuance of an agreement made by it with the Government / an Indian concern. | 10% |
| 11 | Any other income | 30% |
It is vital to note here that the provisions of section 206AA relating to the requirement of furnishing of Permanent Account Number (PAN), and in case of failure the Deductor is required to deduct TDS at a maximum marginal rate of 20% are not applicable in case of non-resident.
However, the relaxation of non-applicability of provisions of section 206AA to the non-resident i.e. the Deductee is available only if the following conditions are satisfied –
- The Deductee is required to furnish details like the Name, E-mail ID and contact number.
- The Deductee is required to provide the address of the country / specified territory outside India in which he is a resident.
- The Deductee is also required to submit a certificate of a resident of the country / specified territory outside India from the Government of that country / specified territory. Such certificate is to be submitted only if the law of that country / specified territory provides for the issuance of such certificate.
TDS return filing and issuance of TDS certificate –
The Deductor is liable to file TDS return in Form 27Q within the following prescribed due dates –
1. April to June – 31st July
2. July to September – 31st October
3. October to December – 31st January
4. January to March – 31st May
Likewise, the Deductor is required to provide the TDS certificate to the Deductee in Form 16A within a period of 15 days from the due date of filing of the TDS return. The due date for issuance of the TDS certificate is summarized here under –
1. April to June – 15thAugust
2. July to September – 15thNovember
3. October to December – 15thFebruary
4. January to March – 15thJune
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AMOUNT PAID TO NON RESIDENT AS CONSIDERATION FOR SALE OF PLOT; AT WHICH RATE TDS WILL BE DEDUCTED? WHETHER ON ENTIRE CONSIDERATION OR ONLY ON PROFIT AMOUNT?
How will a TDS certificate be issued to the non resident if he does not have PAN?
Explained it very well. I would suggest to add about the consequences or process if in case of India is a having a DTAA with the deductee’s country