Tds under section 195
This query is : Resolved
14 June 2014
Dear ALL,
Is TDS deductable on payments made to Foreign Educational institutions in foreign currency on director's educational course, which is claimed as Business expense?
Case Analysis: The director of a company is pursuing educational course in UK for which the company has paid the educational fees, and claimed the same as business expenses.So, now is this transaction liable for TDS u/s 195?
Is TDS deductable on payments made to Foreign Educational institutions in foreign currency on director's educational course, which is claimed as Business expense?
Case Analysis: The director of a company is pursuing educational course in UK for which the company has paid the educational fees, and claimed the same as business expenses.So, now is this transaction liable for TDS u/s 195?
14 June 2014
Although for the education of child, RBI has clarified that 195 TDS may not be made....but this being a business transaction, it is better that TDS be done u/s 195. (The practical application of this could be....company may have to bear the TDS as the educational institute may not settle for net of TDS amount) Your views please
20 June 2014
Dear Amol,
I share the same view, so accordingly the company has also not complied with Form 15CA and Form 15CB. Is'nt?
I share the same view, so accordingly the company has also not complied with Form 15CA and Form 15CB. Is'nt?
23 September 2014
Since the amount paid is not chargeable to tax in india for the non resident, why should he be subjected to tax in india, in the form of TDS?
02 August 2025
Great question! Here’s a detailed take on TDS under **Section 195** for payments made to foreign educational institutions for a director’s course fees claimed as a business expense:
---
### Key points:
1. **Nature of payment:**
The payment is for educational course fees paid by the company on behalf of its director. The course is abroad (e.g., UK) and paid in foreign currency.
2. **TDS applicability under Section 195:**
Section 195 requires deduction of tax at source on any sum payable to a non-resident that is chargeable to tax in India.
3. **Is the payment chargeable to tax in India?**
* If the payment is **not income arising or accruing in India**, then it is generally **not taxable in India**.
* Educational fees paid to a foreign university for a course abroad **do not constitute income taxable in India** for the foreign institution.
4. **RBI and CBDT guidance:**
* RBI has clarified that no TDS is required on **remittances for education of children abroad** (a personal expense).
* However, in the case of **business expenses** (director’s education claimed as business expense), the company is technically making a payment to a non-resident.
5. **Practical stance:**
* Many practitioners suggest deducting TDS as a **precautionary measure** because it is a payment made by an Indian entity to a foreign entity.
* The educational institution may **not agree to receive the net of TDS amount**, so the company effectively bears the TDS cost.
* Non-deduction or incorrect deduction may lead to **interest and penalty** if tax authorities disagree.
6. **Form 15CA and 15CB:**
* Any payment to a non-resident requires furnishing of Form 15CA (declaration) and Form 15CB (chartered accountant certificate) confirming TDS compliance or reasons for no deduction.
* If no TDS is deducted, Form 15CB should provide the rationale (e.g., payment not taxable in India).
---
### Summary for your scenario:
| Situation | Action on TDS under Section 195 |
| ------------------------------------------------- | ---------------------------------------------------- |
| Payment for foreign education (personal) | Generally no TDS required (RBI clarification) |
| Payment for director’s foreign course as business | Better to deduct TDS under Section 195 as precaution |
| Payment not taxable in India (foreign university) | Possible to seek CA certificate for no TDS deduction |
---
### Final advice:
* The safest approach is to **deduct TDS** under Section 195 on the amount paid to the foreign educational institution.
* If TDS is not deducted, ensure a **proper CA certificate (Form 15CB)** supporting non-deduction based on non-taxability in India.
* File **Form 15CA** accordingly.
* This will help avoid future tax demands or penalties.
---
If you want, I can help draft the application for Form 15CB or suggest wordings for the declaration. Would that help?
---
### Key points:
1. **Nature of payment:**
The payment is for educational course fees paid by the company on behalf of its director. The course is abroad (e.g., UK) and paid in foreign currency.
2. **TDS applicability under Section 195:**
Section 195 requires deduction of tax at source on any sum payable to a non-resident that is chargeable to tax in India.
3. **Is the payment chargeable to tax in India?**
* If the payment is **not income arising or accruing in India**, then it is generally **not taxable in India**.
* Educational fees paid to a foreign university for a course abroad **do not constitute income taxable in India** for the foreign institution.
4. **RBI and CBDT guidance:**
* RBI has clarified that no TDS is required on **remittances for education of children abroad** (a personal expense).
* However, in the case of **business expenses** (director’s education claimed as business expense), the company is technically making a payment to a non-resident.
5. **Practical stance:**
* Many practitioners suggest deducting TDS as a **precautionary measure** because it is a payment made by an Indian entity to a foreign entity.
* The educational institution may **not agree to receive the net of TDS amount**, so the company effectively bears the TDS cost.
* Non-deduction or incorrect deduction may lead to **interest and penalty** if tax authorities disagree.
6. **Form 15CA and 15CB:**
* Any payment to a non-resident requires furnishing of Form 15CA (declaration) and Form 15CB (chartered accountant certificate) confirming TDS compliance or reasons for no deduction.
* If no TDS is deducted, Form 15CB should provide the rationale (e.g., payment not taxable in India).
---
### Summary for your scenario:
| Situation | Action on TDS under Section 195 |
| ------------------------------------------------- | ---------------------------------------------------- |
| Payment for foreign education (personal) | Generally no TDS required (RBI clarification) |
| Payment for director’s foreign course as business | Better to deduct TDS under Section 195 as precaution |
| Payment not taxable in India (foreign university) | Possible to seek CA certificate for no TDS deduction |
---
### Final advice:
* The safest approach is to **deduct TDS** under Section 195 on the amount paid to the foreign educational institution.
* If TDS is not deducted, ensure a **proper CA certificate (Form 15CB)** supporting non-deduction based on non-taxability in India.
* File **Form 15CA** accordingly.
* This will help avoid future tax demands or penalties.
---
If you want, I can help draft the application for Form 15CB or suggest wordings for the declaration. Would that help?
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