Tds on licence fees paid to nri
This query is : Resolved
08 January 2014
at what rate tds is to be deducted on license fees paid to US NRI..?
thanks in advance...
thanks in advance...
08 January 2014
It is 20% if PAN is not available. If PAN available then refer DTAA
10 January 2014
HOW TO REFER DTAA
PLEASE CAN U SAY THE EXACT RATEAS AS PER DTAA
PLEASE CAN U SAY THE EXACT RATEAS AS PER DTAA
27 July 2025
When paying **license fees to a US-based NRI**, the **TDS applicability** is governed by **Section 195** of the Income Tax Act, and the rate can vary depending on whether the **Double Taxation Avoidance Agreement (DTAA)** between **India and the USA** is invoked.
---
## ✅ Key Steps to Determine TDS Rate:
### 1. **Check PAN Availability**
* If the **NRI does not have PAN**, then **Section 206AA** applies → **TDS @ 20%**.
* If **PAN is available**, DTAA can be applied → lower rate possible.
---
### 2. **Refer India–USA DTAA**
You can find the full text here:
🔗 [DTAA India-USA](https://incometaxindia.gov.in/pages/international-taxation/dtaa.aspx)
Relevant Article:
**Article 12 – Royalties and Fees for Included Services**
> **Royalty / license fees paid to a US resident** is generally taxed at **15%** (on gross amount) **under DTAA**.
---
### 3. **Determine if Payment Qualifies as 'Royalty'**
"License fees" for the **use of IP, software, or technical know-how** typically fall under **'royalty'** as per Article 12 of the India–US DTAA.
---
## ✅ Final TDS Rate Summary
| Condition | TDS Rate |
| --------------------------------------------- | ------------------------------------------- |
| NRI has no PAN | **20%** under **Section 206AA** |
| NRI has PAN, DTAA invoked with Form 10F & TRC | **15%** (as per **India–USA DTAA**) |
| No DTAA benefit claimed (even if PAN exists) | **30%** (as per Section 115A for royalties) |
---
## ✅ Required Documentation to Claim DTAA Benefit:
1. **Tax Residency Certificate (TRC)** from the US tax authority (IRS)
2. **Form 10F**
3. **Self-declaration** that the NRI has no PE (Permanent Establishment) in India
4. **PAN of the NRI**
---
Let me know if you want a **sample Form 10F** or **self-declaration template** to claim DTAA benefit.
---
## ✅ Key Steps to Determine TDS Rate:
### 1. **Check PAN Availability**
* If the **NRI does not have PAN**, then **Section 206AA** applies → **TDS @ 20%**.
* If **PAN is available**, DTAA can be applied → lower rate possible.
---
### 2. **Refer India–USA DTAA**
You can find the full text here:
🔗 [DTAA India-USA](https://incometaxindia.gov.in/pages/international-taxation/dtaa.aspx)
Relevant Article:
**Article 12 – Royalties and Fees for Included Services**
> **Royalty / license fees paid to a US resident** is generally taxed at **15%** (on gross amount) **under DTAA**.
---
### 3. **Determine if Payment Qualifies as 'Royalty'**
"License fees" for the **use of IP, software, or technical know-how** typically fall under **'royalty'** as per Article 12 of the India–US DTAA.
---
## ✅ Final TDS Rate Summary
| Condition | TDS Rate |
| --------------------------------------------- | ------------------------------------------- |
| NRI has no PAN | **20%** under **Section 206AA** |
| NRI has PAN, DTAA invoked with Form 10F & TRC | **15%** (as per **India–USA DTAA**) |
| No DTAA benefit claimed (even if PAN exists) | **30%** (as per Section 115A for royalties) |
---
## ✅ Required Documentation to Claim DTAA Benefit:
1. **Tax Residency Certificate (TRC)** from the US tax authority (IRS)
2. **Form 10F**
3. **Self-declaration** that the NRI has no PE (Permanent Establishment) in India
4. **PAN of the NRI**
---
Let me know if you want a **sample Form 10F** or **self-declaration template** to claim DTAA benefit.
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