TDS on Consultancy- Non DTAA
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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?
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?
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.
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.
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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