Section 195 requires any person paying a non-resident a sum chargeable to tax in India to deduct TDS at the rates in force, applying the more beneficial of the Income-tax Act or the relevant DTAA. A CA certificate in Form 15CB and a declaration in Form 15CA are generally required before remittance.
Scope of Section 195
Section 195 applies to any sum chargeable to tax in India paid to a non-resident — interest, royalty, fees for technical services, capital gains, and other income. It does not apply to salary (covered by Section 192) or to sums not chargeable to tax in India. The payer must determine taxability and the correct rate before paying.
Act rate vs DTAA rate
The deductor applies the more beneficial of the rate under the Act or the applicable DTAA. To claim the treaty rate, the non-resident must furnish a Tax Residency Certificate (TRC), Form 10F, and (where required) a no-PE declaration. Without these, the higher Act rate (and the Section 206AA fallback where no PAN) may apply.
| Payment | Typical treaty rate (illustrative) |
|---|---|
| Royalty / FTS | 10% (varies by treaty) |
| Interest | 10%-15% (varies) |
| Dividend | 5%-15% (varies) |
the exact rate in the specific DTAA article for the payment.
Forms 15CA and 15CB
- Form 15CB — a CA's certificate on the taxability and rate, required for most taxable foreign remittances above the threshold.
- Form 15CA — the remitter's declaration, filed online, referencing 15CB.
- Certain payments in the specified list (Rule 37BB) are exempt from 15CA/15CB.
Grossing up and lower deduction
If the contract is net of tax, the income is grossed up under Section 195A so the TDS is borne by the payer. To avoid over-deduction, the payer can apply under Section 195(2) for a determination of the taxable portion, or the payee can seek a lower-deduction certificate under Section 197.
Key takeaways
- 195 covers any India-taxable sum paid to a non-resident.
- Apply the more beneficial of the Act or DTAA rate (TRC + 10F).
- Form 15CB (CA certificate) + 15CA (declaration) before remittance.
- Net-of-tax contracts are grossed up under Section 195A.