Claiming the TDS amount deducted by an Indian Company for the payment made to Foreign Company
This query is : Resolved
23 September 2024
Dear All,
Please note an Indian Company has made a consultancy payment - through service bill to a foreign company. While doing the payment, TDS was deducted @10%. Hope the Indian company must pay the TDS next month 7th and file the quarter return u/s 195.
Please confirm how the TDS amount can be claimed by the foreign company or the Indian Company? If no PAN is not there for foreign company how it can be filed?
Please note an Indian Company has made a consultancy payment - through service bill to a foreign company. While doing the payment, TDS was deducted @10%. Hope the Indian company must pay the TDS next month 7th and file the quarter return u/s 195.
Please confirm how the TDS amount can be claimed by the foreign company or the Indian Company? If no PAN is not there for foreign company how it can be filed?
24 September 2024
It is possible to file Form 27Q without the PAN number of the NR in case it is not available. Details such as TIN (Tax Identification Number), permanent address, contact details, country of residence, and email ID can be mentioned in Form 27Q in case of non-availability of PAN.
24 September 2024
Could you explain under what head tds rate of 10% is adopted for payment to foreign company?
12 August 2025
1. TDS Deduction on Payment to Foreign Company
When an Indian company pays a foreign company for services (like consultancy), Section 195 of the Income Tax Act applies.
The Indian company is required to deduct TDS (Tax Deducted at Source) before making the payment to the foreign company.
The TDS rate depends on the Nature of Payment and DTAA (Double Tax Avoidance Agreement) between India and the foreign company’s country.
2. Why 10% TDS?
The 10% TDS rate is typically for payments such as Fees for Technical Services (FTS) or Royalty.
This is often specified under the DTAA between India and the foreign country.
If the foreign company is providing consultancy or technical services, the rate of 10% is a common withholding tax rate under many DTAAs.
For example, under India-USA DTAA, fees for technical services attract 10% TDS.
3. Filing and Payment of TDS by Indian Company
The Indian company deducts TDS @10% at the time of payment or credit to the foreign company.
It deposits the deducted tax with the government by 7th of the following month.
The Indian company files Form 27Q (quarterly TDS return for payments to Non-Residents) with details of the deduction.
4. Claiming the TDS Refund by Foreign Company
The TDS amount deducted belongs to the foreign company, so the foreign company can claim credit for the tax deducted in its home country (subject to DTAA).
However, since the tax is deducted in India, the foreign company must file an Income Tax Return (ITR) in India to claim a refund or to adjust the TDS against their tax liability, if any.
The refund claim can only be made by the foreign company (not the Indian company).
5. If Foreign Company Does NOT have PAN
It is possible to file Form 27Q without the foreign company’s PAN.
In place of PAN, the Indian company can provide the following details in Form 27Q:
Foreign company’s TIN (Tax Identification Number) in its country of residence
Permanent address
Contact details
Country of residence
Email ID
This allows TDS compliance even without PAN.
When an Indian company pays a foreign company for services (like consultancy), Section 195 of the Income Tax Act applies.
The Indian company is required to deduct TDS (Tax Deducted at Source) before making the payment to the foreign company.
The TDS rate depends on the Nature of Payment and DTAA (Double Tax Avoidance Agreement) between India and the foreign company’s country.
2. Why 10% TDS?
The 10% TDS rate is typically for payments such as Fees for Technical Services (FTS) or Royalty.
This is often specified under the DTAA between India and the foreign country.
If the foreign company is providing consultancy or technical services, the rate of 10% is a common withholding tax rate under many DTAAs.
For example, under India-USA DTAA, fees for technical services attract 10% TDS.
3. Filing and Payment of TDS by Indian Company
The Indian company deducts TDS @10% at the time of payment or credit to the foreign company.
It deposits the deducted tax with the government by 7th of the following month.
The Indian company files Form 27Q (quarterly TDS return for payments to Non-Residents) with details of the deduction.
4. Claiming the TDS Refund by Foreign Company
The TDS amount deducted belongs to the foreign company, so the foreign company can claim credit for the tax deducted in its home country (subject to DTAA).
However, since the tax is deducted in India, the foreign company must file an Income Tax Return (ITR) in India to claim a refund or to adjust the TDS against their tax liability, if any.
The refund claim can only be made by the foreign company (not the Indian company).
5. If Foreign Company Does NOT have PAN
It is possible to file Form 27Q without the foreign company’s PAN.
In place of PAN, the Indian company can provide the following details in Form 27Q:
Foreign company’s TIN (Tax Identification Number) in its country of residence
Permanent address
Contact details
Country of residence
Email ID
This allows TDS compliance even without PAN.
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