sec 195
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
25 December 2010
whether pvt co. ,making pymt to non resident (japan) towards architechtural technical consultancy chgs provided abroad to be used in india is required to deduct tds? if yes whether rate is 10% and if No PAN is available whther 20% RATE IS CORRECT? pLS aDVISE
25 December 2010
yes liable to TDS in india @10%.
furnishing of PAN is applicable in case of resident.
furnishing of PAN is applicable in case of resident.
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 December 2010
if the income is by way of technical fees in pursuance of agreement approved by central govt ,it is 10% or else it will be 30%.................whether right?
wht abt surcharge and edu cess in this case? and i think if PAN is nt available the highest of the foll is chargeable in case of non resident:
--rates in force
--rate sas per act/provisions
--20%
so in this case it will be 30% ....whether it is right?
wht abt surcharge and edu cess in this case? and i think if PAN is nt available the highest of the foll is chargeable in case of non resident:
--rates in force
--rate sas per act/provisions
--20%
so in this case it will be 30% ....whether it is right?
23 July 2025
You're asking whether a **private company** making payment to a **non-resident (Japan)** for **architectural technical consultancy provided abroad but used in India** is required to deduct **TDS**, and what the **correct rate** would be — especially in the absence of PAN.
Let’s walk through this carefully.
---
## ✅ 1. **Is TDS under Section 195 applicable?**
**Yes**, TDS is applicable.
### Why?
* Payment is being made **to a non-resident**
* Service (technical consultancy) is **used in India**
* As per **Section 9(1)(vii)** of the Income-tax Act, **fees for technical services (FTS)** are **deemed to accrue or arise in India** if they are **used in India** — even if services are rendered outside India.
So, TDS under **Section 195** is mandatory **even if the services are rendered abroad** — if the benefit is used in India.
---
## ✅ 2. **What is the applicable TDS rate?**
There are **two options**, depending on whether you apply the **domestic law** or the **DTAA (India–Japan tax treaty)**:
---
### ✅ (A) **Under Income Tax Act (Domestic law)**:
* **FTS paid to non-resident** is taxable at **10% + surcharge + cess**
* If PAN **is not available**, then **Section 206AA** applies
#### Without PAN:
> TDS must be **higher of**:
1. Rate specified in the Act (10% + SC + Cess)
2. Rate in force (could be DTAA rate if claimed)
3. **20%**
So, **20% applies** if **no PAN + no valid DTAA documents** (TRC, Form 10F, etc.)
---
### ✅ (B) **Under India–Japan DTAA (Article 12)**:
* **Fees for Technical Services** are taxed at **10% (gross amount)** if:
* Technical knowledge is **"made available"** (i.e., you become self-reliant using that service)
* DTAA rate is **flat 10%** (no surcharge or cess added)
* **PAN not mandatory** under DTAA, **if**:
* You obtain:
* **Tax Residency Certificate (TRC)** from Japanese company
* **Form 10F**
* Self-declaration of beneficial ownership and no PE in India
👉 If those are **not obtained**, then **206AA overrides DTAA** and **20% applies**
---
## ✅ 3. **Is PAN mandatory for DTAA benefit?**
* **NO**, PAN is **not mandatory**, if:
* TRC + Form 10F + self-declaration are obtained
* This is clarified in CBDT **Notification No. 57/2013, dated 1 August 2013**
---
## ✅ 4. **Should surcharge and cess be added?**
| Situation | Add SC + Cess? |
| ----------------------------- | -------------------------------------- |
| Using **domestic rate (10%)** | ✅ Yes → Effective \~10.4% to 10.92% |
| Using **DTAA rate (10%)** | ❌ No → Flat 10% (no cess or surcharge) |
---
## ✅ Summary of TDS Applicability
| Scenario | PAN Available | TRC Available | TDS Rate |
| --------------------- | ------------- | ------------- | -------------------------------- |
| Domestic Rate | ✅ Yes | ❌ No | 10% + SC + Cess (\~10.4%–10.92%) |
| DTAA (with documents) | ❌ No | ✅ Yes | 10% flat (DTAA prevails) |
| No PAN, No DTAA docs | ❌ No | ❌ No | 20% (Section 206AA) |
---
## ✅ Recommendation:
* **Obtain TRC + Form 10F** from Japanese company
* **Use DTAA rate of 10% flat**
* Avoid 20% deduction under Section 206AA by complying with documentation
---
If you want help with a **draft Form 10F**, **TRC request letter**, or **TDS calculation** with/without PAN, let me know.
Let’s walk through this carefully.
---
## ✅ 1. **Is TDS under Section 195 applicable?**
**Yes**, TDS is applicable.
### Why?
* Payment is being made **to a non-resident**
* Service (technical consultancy) is **used in India**
* As per **Section 9(1)(vii)** of the Income-tax Act, **fees for technical services (FTS)** are **deemed to accrue or arise in India** if they are **used in India** — even if services are rendered outside India.
So, TDS under **Section 195** is mandatory **even if the services are rendered abroad** — if the benefit is used in India.
---
## ✅ 2. **What is the applicable TDS rate?**
There are **two options**, depending on whether you apply the **domestic law** or the **DTAA (India–Japan tax treaty)**:
---
### ✅ (A) **Under Income Tax Act (Domestic law)**:
* **FTS paid to non-resident** is taxable at **10% + surcharge + cess**
* If PAN **is not available**, then **Section 206AA** applies
#### Without PAN:
> TDS must be **higher of**:
1. Rate specified in the Act (10% + SC + Cess)
2. Rate in force (could be DTAA rate if claimed)
3. **20%**
So, **20% applies** if **no PAN + no valid DTAA documents** (TRC, Form 10F, etc.)
---
### ✅ (B) **Under India–Japan DTAA (Article 12)**:
* **Fees for Technical Services** are taxed at **10% (gross amount)** if:
* Technical knowledge is **"made available"** (i.e., you become self-reliant using that service)
* DTAA rate is **flat 10%** (no surcharge or cess added)
* **PAN not mandatory** under DTAA, **if**:
* You obtain:
* **Tax Residency Certificate (TRC)** from Japanese company
* **Form 10F**
* Self-declaration of beneficial ownership and no PE in India
👉 If those are **not obtained**, then **206AA overrides DTAA** and **20% applies**
---
## ✅ 3. **Is PAN mandatory for DTAA benefit?**
* **NO**, PAN is **not mandatory**, if:
* TRC + Form 10F + self-declaration are obtained
* This is clarified in CBDT **Notification No. 57/2013, dated 1 August 2013**
---
## ✅ 4. **Should surcharge and cess be added?**
| Situation | Add SC + Cess? |
| ----------------------------- | -------------------------------------- |
| Using **domestic rate (10%)** | ✅ Yes → Effective \~10.4% to 10.92% |
| Using **DTAA rate (10%)** | ❌ No → Flat 10% (no cess or surcharge) |
---
## ✅ Summary of TDS Applicability
| Scenario | PAN Available | TRC Available | TDS Rate |
| --------------------- | ------------- | ------------- | -------------------------------- |
| Domestic Rate | ✅ Yes | ❌ No | 10% + SC + Cess (\~10.4%–10.92%) |
| DTAA (with documents) | ❌ No | ✅ Yes | 10% flat (DTAA prevails) |
| No PAN, No DTAA docs | ❌ No | ❌ No | 20% (Section 206AA) |
---
## ✅ Recommendation:
* **Obtain TRC + Form 10F** from Japanese company
* **Use DTAA rate of 10% flat**
* Avoid 20% deduction under Section 206AA by complying with documentation
---
If you want help with a **draft Form 10F**, **TRC request letter**, or **TDS calculation** with/without PAN, let me know.
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