Under section 195

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Chandrashekhar (Querist)
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22 March 2014 Sir,

I have question regarding u/s 195

1) If i take buyer credit loan from foreign bank which is no office/branch in india.

My question is whether TDS u/s 195 or any section is applicable,why.

2) if I take buyer credit loan from Indian Bank foreign Branch whether tds to be deducted u/s 195 or not

Please do the needful

Thanks

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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22 March 2014 1) Section 195 attracts on the interest payment being payment to non -resident. Office of branch in India is immaterial. Pl see explanation to section 9(2) of the Income tax act,1961. DTAA provisions also has to be looked into.

2) The status of the foreign branch is' resident' since the control and management is situated in India . Pl see section 6(3)(ii) of the Income tax Act,1961. Therefore, no TDS on interest payment.

Chandrashekhar

Chandrashekhar (Querist)
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25 March 2014 Thanks for the reply,

i aggree we have to deduct tds on interest payment whether branch/office in india it means that i have to deduct 20% tds on 1st question because if there is no office/branch in india means there will not be any PAN in india.

Am i right

i need your answer please,
Thanks

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Got it! Here's a clear explanation of your query regarding **Section 195** and TDS on buyer credit loans from foreign banks:

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### Section 195 Overview:

* Section 195 mandates **deduction of TDS on any sum payable to a non-resident**, including interest.
* The payer must deduct TDS when making payments to non-residents **for any income arising or accruing in India**.

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### Your Questions:

#### 1) Buyer credit loan from foreign bank with **no office/branch in India**:

* Yes, **TDS under Section 195 is applicable** on interest payments made to this foreign bank.
* Reason: The payment of interest to a non-resident is income accruing/arising in India.
* Whether the bank has an office or branch in India or not is irrelevant here.
* **PAN or no PAN, TDS must be deducted at the prescribed rate (usually 20% or as per DTAA).**

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#### 2) Buyer credit loan from Indian bank’s **foreign branch**:

* The foreign branch is considered a **resident** as per Section 6(3)(ii) since the control and management is in India.
* Therefore, **interest paid to the foreign branch is treated as payment to a resident**.
* Hence, **no TDS under Section 195 on interest payments to the foreign branch.**

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### Your doubt about PAN:

* Even if the foreign bank does not have PAN, **TDS must still be deducted** under Section 195.
* If the non-resident does not provide PAN, **TDS is deducted at higher rates (e.g., 20%)** as per Income Tax rules.
* The payer (you) is responsible to deduct TDS and deposit with the government regardless of PAN availability.

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### Summary Table:

| Scenario | TDS Deduction under Section 195 | PAN Requirement | Remarks |
| -------------------------------------------------------------- | ------------------------------- | ---------------------------------- | -------------------------------------------------- |
| Foreign bank with no office/branch in India (Interest payment) | Yes | Not necessary but affects TDS rate | Deduct TDS at applicable rate (20% or as per DTAA) |
| Indian bank’s foreign branch (Interest payment) | No | Not applicable | Considered resident, no TDS needed |

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If you want, I can help you with the exact procedure to deduct and deposit TDS under Section 195 or how DTAA affects the rate.

Would you like that?

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