With holding tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2013 Hi Sirs,

We are remitting Commission on Net profits to non resident directors

Whether TDS is applicable on this payments. under which section and at what rate?

If we are claiming benefit under DTAA what is the procedure under new form 15CA CB rules.

Thanks

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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29 October 2013 Tds will be deducted u/s 195 payment to non-resident.

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2013 Thank you Sir,

WHAT IS THE RATE APPLICABLE TO THIS TYPE OF PAYMENTS( commission on net profits to directors).

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Hi! Here’s the answer for your query on TDS on commission on net profits to non-resident directors:

1. Applicability of TDS:
Yes, TDS is applicable on commission payments made to non-resident directors.

As per Section 195 of the Income Tax Act, any payment to a non-resident that is chargeable to tax in India attracts TDS.

2. Nature of Income:
Commission on net profits to directors is generally considered as “Fees for Technical Services” (FTS) or “Business Income” depending on facts and nature of agreement.

The classification matters because the TDS rate varies.

3. Applicable Rate:
If treated as FTS, TDS rate is generally 10% (plus surcharge and cess).

If treated as Business Income, TDS rate is 40% (plus surcharge and cess).

However, if a Double Taxation Avoidance Agreement (DTAA) applies, the rate mentioned in the treaty would prevail, which is often lower than domestic rates.

4. DTAA Benefit & Documentation:
To claim DTAA benefits, the non-resident must provide:

Tax Residency Certificate (TRC) from their country.

Declaration in Form 15CA & 15CB (Chartered Accountant’s certificate).

Form 15CA (online filing) needs to be submitted for remittance.

Form 15CB is the CA certificate certifying tax deducted or not deductible as per DTAA.

Summary:
Scenario TDS Rate (approx)
Without DTAA benefit (Business Income) 40%
Without DTAA benefit (FTS) 10%
With DTAA As per treaty rate (may be lower)

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