Tds on salary of foreign national

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2017 Dear experts, one of my client propose to employ one technical person from Japan, he will in employment for 2 to 3 years, and will be paid salary in Indian currency, now I wants to know whether TDS provisions on the payment of salary to him will apply or not?

If yes, he is not having the PAN, to get the same he is a resident of JAPAN, is it possible to get the PAN?

Then at what rate the TDS to be deducted from the salary?
please clarify

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 November 2017 TDS provisions on salary payment will be applicable. It's possible to get PAN for non resident.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 November 2017 Full tax payable has to be deducted as TDS u/s 192.

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2017 Is there any agreement for avoidance of double taxation treaty

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 November 2017 Yes
http://www.incometaxindia.gov.in/dtaa/comprehensive%20agreements/108690000000000039.htm

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2017 So in such a case will there any relief to the person who is getting the salary?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 November 2017 Yes relief in other country will be available.

Aditya Agrawal

Aditya Agrawal (Querist)
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12 November 2017 TDS has to be deducted but u/s 195 ( if the techincal expert is a non resident) PAN can be obtained and the “Double Taxation Avoidance Agreement” between Indian Govt and the Govt of the experts country will allow for relief of tax. Even if does not, it is your liability to deduct TDS else IT Department will catch hold of you. Hope this helps ....

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 You're dealing with **TDS on salary of a foreign national (from Japan)** who will be working in India for 2–3 years. This is a **very relevant** and sensitive topic, both under **Section 192** and the **India–Japan Double Taxation Avoidance Agreement (DTAA)**.

Let's go through your concerns step-by-step:

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## ✅ 1. **Is TDS applicable on salary paid to a foreign national in India?**

**Yes.**
TDS **under Section 192** of the Income Tax Act applies to **any salary paid for services rendered in India**, regardless of the employee's nationality.

> 💡 If the foreign national qualifies as a **resident or resident but not ordinarily resident (RNOR)** in India, they will be taxed on **global income**.
> If **non-resident**, only **Indian income** (salary earned in India) is taxed.

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## ✅ 2. **PAN Requirement**

* Yes, a **foreign national can apply for PAN** using **Form 49AA**.
* It's **mandatory** to deduct TDS at **higher of the applicable rate or 20%** if PAN is **not furnished** (Section 206AA).
* So if no PAN is available, **TDS will be deducted at 20% or slab rates—whichever is higher**.

👉 So, **get PAN** to avoid flat 20% deduction.

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## ✅ 3. **Which Section Applies — 192 or 195?**

> 🔶 **Section 192** applies to *salary income*, **even if paid to a non-resident**.
> **Section 195** applies to *payments to non-residents* **other than salary** (e.g., consultancy fees, royalties, etc.).

🔸 So, for a **foreign employee**, **TDS on salary will be deducted under Section 192**, not 195.

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## ✅ 4. **TDS Rate and Taxability**

* TDS must be deducted **as per slab rates** (normal individual rates) under **Section 192**.
* You can consider:

* **Basic exemption limit** (₹2.5 lakh, or ₹3 lakh if senior).
* **Rebate under Section 87A** not allowed for non-residents.
* **No PAN?** → TDS at **higher of slab or 20%** (Section 206AA).

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## ✅ 5. **Relief under DTAA (India–Japan DTAA)**

* Since India and Japan have a DTAA, the employee can claim **foreign tax credit** in Japan for taxes paid in India.
* However, **this relief is available in Japan** (not in India).
* You **still need to deduct TDS in India** as per the **Income Tax Act** unless:

* He gets a **certificate for lower or NIL deduction under Section 197**, or
* Proves **non-taxability** through a valid **TRC (Tax Residency Certificate)** and DTAA article claim.

---

## ✅ 6. **Additional Compliance**

* Provide **Form 16** to the employee.
* Ensure he gets a **PAN**, even if temporarily residing.
* Include him in your **TDS returns (Form 24Q)**.

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## 🧾 Summary Table:

| Question | Answer |
| ---------------------------------------- | ------------------------------------------ |
| TDS applicable on foreign national? | ✅ Yes, u/s **192** (not 195) |
| Can he get PAN? | ✅ Yes, via **Form 49AA** |
| What if no PAN? | ❌ TDS @ 20% (206AA overrides slab rates) |
| TDS rate? | Slab rates under 192, unless 206AA applies |
| Can DTAA be used for exemption in India? | ❌ Not directly — must still deduct TDS |
| DTAA relief available? | ✅ Yes, **in Japan**, via tax credit |

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## 💬 Final Advice:

* Get PAN issued **as early as possible** to avoid flat 20% TDS.
* Deduct TDS under **Section 192** using **slab rates**.
* Maintain payroll documentation and obtain **TRC** for DTAA benefit (for the employee’s Japanese filing).
* Consider helping the employee engage a tax consultant to **claim DTAA benefit** properly.

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Let me know if you’d like a TDS calculation template or guidance on Form 49AA or TRC.

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