sec 195

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Senthil Kumar (Querist)
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22 June 2016 Dear members we have received services from Non resident on Jan 2016 and paid service tax (Reverse charge Mechanism) on Jan 2016. We have paid tds in June 2016 after obtaining form 15CB. please let me know we need to pay interest on tds payment and also let me know the applicability of surcharge on the above.

Rupesh Jain

Rupesh Jain (Expert)
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22 June 2016 you have to deduct the tds when you books the bill in your books , you can deposit the tds with the intt of @1.5% per month from the month in which you deducted to deposit month.

Senthil Kumar

Senthil Kumar (Querist)
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22 June 2016 is it mandatory to make tds payment after obtaining form 15cb?

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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23 July 2025 You've raised two important questions related to **TDS on payments to non-residents** under **Section 195**, especially in the context of:

1. **Delayed TDS payment**
2. **Form 15CB requirement**
3. **Applicability of surcharge and interest**

Let me address each point clearly and precisely:

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### ✅ 1. **Was Interest Applicable on TDS Paid Late?**

**Yes**, interest is **applicable under Section 201(1A)** of the Income Tax Act.

Here’s how it works:

| Situation | Interest Rate | Period |
| ----------------------------------------------------------- | ------------------ | -------------------------------------------------------------- |
| TDS **deducted late** (i.e., not at time of credit/payment) | **1% per month** | From **date tax was deductible** to **date actually deducted** |
| TDS **deducted but deposited late** | **1.5% per month** | From **date of deduction** to **date of deposit** |

#### 📌 In your case:

* **Services received + invoice booked in Jan 2016**
* **TDS paid only in June 2016**
* So, TDS should have been **deducted in Jan 2016**
* You must pay **interest at 1% per month** from **Jan 2016 to June 2016** (i.e., **5 months = 5% interest**)

👉 If you actually deducted TDS in June 2016 but were **supposed to deduct it in Jan**, then the entire period attracts **1% per month**, **not 1.5%**, because deduction itself was delayed.

---

### ✅ 2. **Is Form 15CB Mandatory Before Making TDS Payment?**

**No**, it's **not mandatory in all cases**. The requirement of **Form 15CB/15CA** is governed by **Rule 37BB**.

#### 📑 Form 15CB is required when:

* The payment to a non-resident is **taxable** in India
* The payment amount **exceeds ₹5 lakh** in a financial year
* AND it's **not covered under the list of 33 exempted payments** (like imports, dividends, etc.)

So, **Form 15CB is a certification by a Chartered Accountant** for TDS applicability and rate.

But:

> ❗ It does **not dictate when TDS should be deducted**. TDS must still be deducted at the **time of credit or payment**, whichever is earlier, **regardless of when 15CB is obtained**.

---

### ✅ 3. **Is Surcharge and Cess Applicable?**

Yes, on TDS paid to non-residents, **surcharge and health & education cess** may be applicable depending on the nature and amount of payment.

#### 🧾 Typical TDS Rates on Non-resident Payments:

| Nature of Payment | Basic Rate | Surcharge | H\&EC | Total (Approx) |
| ---------------------------- | -------------------------------- | ---------------------------- | ------ | ------------------- |
| Royalty / FTS | 10% (DTAA) or 10%–25% (domestic) | 2% or 5% (if > ₹50L or ₹1Cr) | 4% | \~10.4% to \~28% |
| Business income (if taxable) | 30% | + surcharge | + cess | High effective rate |

👉 If you're applying DTAA rate (say, 10% for US), **surcharge and cess are NOT added** if the **DTAA rate is inclusive of all taxes** — which is usually the case.

> **Use Form 10F + TRC from payee** to claim DTAA rate. Otherwise, Indian rates with surcharge/cess apply.

---

### ✅ Summary for You:

| Item | Status |
| -------------------- | -------------------------------------------------------------------------------- |
| **Interest** | ✅ Yes, 1% per month from Jan to June 2016 |
| **Form 15CB** | ✅ Required if payment > ₹5 lakh and taxable; but does NOT postpone TDS liability |
| **Surcharge/Cess** | ✅ Applicable unless DTAA rate is claimed with valid documents |
| **Penalty u/s 234E** | ❌ Not applicable here, as this is for delayed TDS return, not late payment |

---

### ✅ Action Steps:

1. **Calculate interest @ 1% per month** from Jan to June 2016
2. Ensure **Form 15CA/15CB** is in place before remittance
3. Use **DTAA** if TRC + Form 10F is available
4. Deposit **correct TDS** with interest (use Challan 281)

Let me know if you want help calculating the **exact amount of interest** or drafting the **TDS rate under DTAA**.

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