Demand from TRACES

987 views

Save Share

Dipjyoti Majumdar

CA in service & CS. dipmaj@

2877 Points Posted on 11 October 2026

Dear Members

Indian company booked a invoice towards fee for technical services (FTS) from a non resident company for apprx USD 3000.

INR converted value = apprx ₹. 300,000/-.

While making outward remittance to the entity, withholding tax was made @ 10.4% say 31,200/- and tds was paid to government under section 393 vide code 1057. This was done under DTAA provisions between India and the foreign country. The non resident payee does not have a PAN in India. It does not have a PE in India. It has given TRC to the indian payer company.

Form 146 (15CB) was also obtained.

After filing TDS return in Form 144 (27Q), TRACES has considered TDS @ 50% and has sent a demand of 150,000 less 31,200 plus interest apprx ₹. 130,000/-.

Please advise if -

a) a rectification request be placed under TRACES;

b) appeal be filed

c) any other remedy is available

Regards

CA Dipjyoti Majumdar

Replies (2)

Quick Summary

An Indian company received a TRACES demand for withholding tax on fees paid to a non-resident, as the system applied a 50% rate due to the absence of a PAN. Although a Tax Residency Certificate (TRC) was provided, the demand was raised. The advice is to file an online correction request on TRACES, ensuring all non-resident details, including foreign TIN and address, are correctly entered. This approach is preferred over an immediate appeal, with further steps like raising a grievance on TRACES if the demand persists after correction.

Aashok Kumar Sharma

Finance/Compliance Consultant

69816 Points Posted on 11 October 2026

The TRACES demand was generated because Section 206AA auto-applied a 50% rate due to the lack of a PAN. Since the payee provided a TRC under DTAA provisions, the deductor is protected under Rule 37BC. File an online Correction Request for Form 27Q on TRACES incorporating foreign TIN, address, and TRC details rather than an immediate appeal.

Tax Garden

Tax Consultant

2036 Points Posted on 15 October 2026

Agree with the correction route, appeal is the last option. A few things to check in the 27Q before filing the correction:

1. Deductee row. See how the payee PAN was reported. If it was left as PANNOTAVBL and the non-resident details (country, address, tax identification number in the home country) are blank, TRACES treats it as no-PAN and applies the higher rate. Fill those fields.
2. TRC and no-PAN relief. The relief that lets you deduct at the treaty rate without PAN depends on giving the TRC, the TIN, name, address and country. Quote the provision under the rules that apply to your payment date (payments after 1 April 2026 fall under the Income-tax Act 2025 and Rules 2026, so do not rely only on the old Rule 37BC reference).
3. The 50%. The usual higher rate for no PAN has a floor of 20%, so ask how the system got to 50%. It may be a wrong rate or an incorrect deductee category. Look at the default computation in the demand details on TRACES.
4. Order of steps. File the online correction first, then check the demand status after the processed statement. If the demand stays, raise a grievance on TRACES with the TRC and 15CB copies attached before thinking of an appeal.
5. Interest. Check whether interest is on the shortfall only. Some of it should fall away once the demand is reduced.

Keep the TRC, Form 41 (the old Form 10F) if the payee filed it, the 15CB and the invoice in one PDF set, it will be asked for.