TDS on nri came to India

Hi Afreen! Good question about TDS on payments to NRIs for consultancy services when payment is made outside India.

Situation:

• You (in India) receive consultancy services from an NRI.

• The NRI is outside India at the time of payment.

• Payment is made in Euro (foreign currency) to the NRI.

✅ Is TDS applicable?

Yes, TDS is applicable on payments made to NRIs for services rendered, irrespective of where the payment is made.

Why?

Under Section 195 of the Income Tax Act:

• Any person making a payment to a non-resident (including NRIs) which is chargeable to tax in India must deduct TDS at the time of payment.

• Consultancy services income earned by an NRI for services performed in India is taxable in India.

• Even if payment is made outside India, TDS deduction is required at the time of payment or credit (whichever is earlier).

✅ Which section?

• Section 195 — Deduction of TDS on payments to non-residents.

✅ Applicable TDS rate?

• Depends on the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the NRI.

• If no DTAA benefit is claimed, the default rate under IT Act applies, generally 10% for fees for technical or professional services (plus surcharge and cess).

• You can ask the NRI to provide a Tax Residency Certificate (TRC) and Form 10F for DTAA benefits.

✅ What if you don’t deduct TDS?

• You may be liable to pay the tax along with interest and penalties under the disallowance provisions.

Summary: