Section 195

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HIMANSHU MEHTA (Querist)
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20 November 2013 what is the rate of tax to be withhold for payment to non resident(Foreign Company) for service fees rendered.

CA JATIN TALREJA

CA JATIN TALREJA (Expert)
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22 November 2013 where the payment is upto Rs.1 cr the rate of tax will be 25.75%,if it is between 1 cr-10 cr then 26.265 and if its exceeds 10 cr the 27.0375%

HIMANSHU MEHTA

HIMANSHU MEHTA (Querist)
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27 November 2013 The same is for Management fees, then also TDS would be 25.75% or 30.90%?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 Under Section 195 of the Income Tax Act, 1961, any payment made to a non-resident (including a foreign company) for services rendered is subject to Tax Deducted at Source (TDS). The rate of TDS depends on various factors like the nature of the payment and the provisions of the relevant Double Taxation Avoidance Agreement (DTAA) between India and the country of the non-resident.

Rate of TDS for Payments to Non-Residents (Foreign Company) for Services Rendered:
Standard TDS Rates (Without DTAA Relief):

The basic rate of TDS for payments to a foreign company or non-resident individual for fees for technical services (FTS), professional services, or management fees is typically 10% (plus applicable surcharge and cess).

Surcharge and Cess:

In addition to the base TDS rate, a surcharge and cess are applicable as follows:

Surcharge: 2% if the total income exceeds Rs. 1 crore, and 5% if the total income exceeds Rs. 10 crore.

Health and Education Cess: 4% on the total tax (base tax + surcharge).

So, after adding surcharge and cess, the TDS rates for non-residents can be as follows:

If the payment is up to Rs. 1 crore:
TDS rate = 10% + surcharge + cess = 25.75%.

If the payment is between Rs. 1 crore and Rs. 10 crore:
TDS rate = 10% + surcharge + cess = 26.265%.

If the payment exceeds Rs. 10 crore:
TDS rate = 10% + surcharge + cess = 27.0375%.

Specific Question on Management Fees:
Yes, the TDS rate for management fees would also be subject to the same rates as those for service fees unless a DTAA provides a different rate.

The applicable rate would be 25.75% for payments up to Rs. 1 crore, 26.265% for payments between Rs. 1 crore and Rs. 10 crore, and 27.0375% for payments exceeding Rs. 10 crore.

Conclusion:
25.75% is generally the applicable TDS rate if the payment is up to Rs. 1 crore.

For payments exceeding Rs. 1 crore but not exceeding Rs. 10 crore, the rate would be 26.265%.

For payments above Rs. 10 crore, the rate would be 27.0375%.

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