Tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 April 2018 Dear,

If deductee is a Foreign company. Payment is related to fees for professional services.

My question is :- Is exemption available for non-furnishing of PAN (u/s 206AA). TDS rate will be 20% for non-furnishing of pan or tds will be 10% as per normal income tax rules

thx

CA Mayur Todmal

CA Mayur Todmal (Expert)
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25 April 2018 are you talking about this notification?
https://www.pwc.in/assets/pdfs/news-alert-tax/2016/pwc_news_alert-28_june_2016-cbdt_notifies_conditions_for_non-resident_deductees_to_avail_relaxation_from_higher_withhol.pdf

Querist : Anonymous

Querist : Anonymous (Querist)

26 April 2018 Sir,
As per my understanding this notification is applicable only if deductee is a non residents other than company , other than a foreign company (i.e. notification is not applicable on foreign company ) As per my understanding If I am paying to a foreign company which does not have PAN then I have to deduct 20% Tax instead of 10 %. Am I right ??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 You're mostly right, and here's the full explanation:

---

### ✅ **Issue: TDS on Payment to a Foreign Company for Professional Services — No PAN Furnished**

* **Section involved**: **206AA** of the Income Tax Act, 1961
* **Nature of payment**: **Fees for professional or technical services (likely under Section 9(1)(vii))**
* **Recipient**: **Foreign company**
* **PAN status**: **Not furnished**

---

### 🔍 What Does Section 206AA Say?

If **PAN is not furnished** by the deductee, **TDS must be deducted at 20% or the applicable rate**, **whichever is higher**.

---

### ✅ **CBDT Notification (No. 53/2016 dated 24.06.2016)**

This notification **relaxes the 206AA requirement** **only for certain non-resident deductees**, subject to conditions.

🔹 It applies to:

* Non-residents **other than a company**, or
* A **foreign company** **only if** the payment is not:

* Interest
* Royalty
* Fees for technical services (FTS)
* Capital gains

So for payments like **professional/technical services** made to a **foreign company**, this **relaxation does not apply**.

---

### ✅ Final Answer:

Yes, **you are right**.

Since:

* The payment is to a **foreign company**
* It is for **fees for professional/technical services**
* The **deductee has not furnished PAN**
* And the **CBDT notification doesn’t apply**

👉 **TDS must be deducted at 20%** under Section 206AA.

---

### 📝 Important Note:

Even if the DTAA rate is lower (say 10%), **PAN is mandatory** to avail DTAA rates.

Without PAN:

* No DTAA benefit
* No lower TDS rate
* 206AA overrides

---

Let me know if you want help drafting a note or TDS certificate in such cases.

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