TDS on professional services being paid to US citizen in excess of Rs 30,000

Hey Karthik! Here’s a clear answer about TDS on professional fees (academic honoraria) paid to a US citizen:

1. Is TDS applicable?

Yes, when you pay professional or technical fees to a non-resident (including US citizens) for services rendered in India, TDS is applicable under Section 195 of the Income Tax Act.

2. Threshold limit Rs. 30,000

• For payments to Indian residents, professional fees have a threshold of Rs. 30,000 (below which TDS may not be deducted).

• For non-residents, no threshold limit applies — TDS must be deducted on the full amount regardless of the value.

3. TDS Rate

• The rate is typically 10% on fees for technical services or professional services, plus applicable surcharge and cess.

• However, since the payee is a US resident, the DTAA between India and the US applies.

4. DTAA Considerations

• As per the India-US DTAA, the tax rate on fees for technical services or professional services is capped at 15%(including surcharge and cess).

• So, you can deduct TDS at 15% (or lower rate if applicable), subject to the payee submitting a valid Tax Residency Certificate (TRC) and Form 10F to claim treaty benefits.

• If no TRC is provided, then you deduct at the domestic rate of 10% + surcharge + cess.

5. Summary

6. Additional

• You’ll need to file Form 15CA/15CB while making remittance.

• Ensure to deduct and deposit TDS timely to avoid penalties.