TDS on Consultancy- Non DTAA

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This discussion clarifies the TDS deduction rate for consultancy fees paid to a US-based non-resident who holds a Green Card. For non-DTAA cases, the base TDS rate under Section 195 is 20%, which increases to 20.8% after adding the 4% Health & Education Cess. Additional surcharges may apply if the payment exceeds ₹50 Lakhs. The discussion also touches upon the specific conditions under Section 195(2)(l) regarding agreements for technical services and whether the 20% rate applies even without such an agreement.

cfo sattva

cfo sattva (Querist)

15 September 2026 We have a Company Secretary who is a US Green Card holder and is providing consultancy services to our company.

The payment is being made to him in the USA and it is a non-DTAA case.

Under Section 195 of the Income-tax Act, at what rate should TDS be deducted on the consultancy fees paid to him?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

15 September 2026 For a non-DTAA consultancy payment to a US-based non-resident under Section 195, the TDS must be deducted at a base rate of 20% under Section 115A. After adding the mandatory 4% Health & Education Cess, the effective TDS rate to deduct is 20.8% (plus applicable surcharge if the payment exceeds ₹50 Lakhs). Compliance will also require filing Forms 15CA and 15CB.

cfo sattva

cfo sattva (Querist)

15 September 2026 Thanks for the reply.

l) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy.

The above is the point which is concerning me.

If we read Clause (l) of Section 195, the 20% rate appears to apply specifically to fees for technical services paid in pursuance of an agreement with the Government or an Indian concern, subject to the conditions mentioned in the clause.

In our case, there is no such agreement. Therefore, can we still apply the 20% rate merely because the payment is towards consultancy/technical services?

As I understand it, the 20% rate under this clause is applicable only where the specified agreement conditions are satisfied. For payments not falling under this specific category, the applicable rate would need to be considered separately.

Kindly clarify whether my understanding is correct.

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