TDS on Payments to non-residents — Section 195 (now 393)
Rate
| Type of payment | Rate (with PAN) | Notes |
|---|---|---|
| non resident | act-or-dtaa | Rates in force under the Act (e.g. 20% royalty/FTS + surcharge/cess) or DTAA rate if lower and TRC furnished |
No valid PAN: 20% or the normal rate, whichever is higher (Section 397(2), old 206AA).
Threshold
TDS applies when: Any amount. Once a threshold is crossed, TDS applies on the full amount, not just the excess.
Exemptions & relief
- DTAA relief with TRC + Form 10F
- Lower/nil certificate route
If you get it wrong
Late deduction: 1% per month or part thereof, from date deductible to date deducted.
Late deposit: 1.5% per month or part thereof, from date deducted to date deposited.
Late return: Rs 200/day (234E equivalent), capped at TDS amount in the statement.
Non-deduction: 30% of expenditure disallowed for non-deduction/non-deposit (40(a)(ia) equivalent); wrong payment code can trigger the same — verify scope under 2025 Act.
Good to know
- Forms 145/146 replace 15CA/15CB for remittance reporting
- Budget 2026: NRI property purchase TDS is PAN-based (no TAN for buyer)
- 15CB-equivalent certification requires a practising CA — core lead-gen topic
FAQs
What is the new section number for 195 from FY 2026-27?
Under the Income Tax Act 2025, 195 now falls under Section 393. The payment/return code is 1057.
What is the TDS rate under section 195?
act-or-dtaa for non resident. If the payee has no valid PAN, 20% applies (or the normal rate, whichever is higher).
What is the threshold for 195?
Any amount.
Which TDS return is 195 reported in?
Form 144 (was 27Q) (was 27Q), filed quarterly.
Written and reviewed by a CA firm. Verified 2026-06-08 against the Income Tax Act 2025 / Finance Act 2025. General information, not advice for your specific case.