TDS · Section 195 · FY 2026–27
Section 195: TDS on Payments to Non-Residents
Section 195 (TDS on Payments to Non-Residents): the TDS rate varies (10-40%); often reduced under DTAA. Threshold: No threshold — applicable on the first rupee paid to a non-resident. From 1 April 2026 the Income-tax Act, 2025 moves it to Section 393(2) Sl. 17, with the same rate and threshold.
Section 195 covers TDS on any sum chargeable to tax paid to a non-resident. Rates depend on the nature of payment (royalty, FTS, interest, capital gains) and any applicable DTAA (Double Taxation Avoidance Agreement) treaty between India and the recipient’s country. Common rates under the Act: 20% on royalty and fees for technical services, 20% on most interest, plus surcharge and cess. A DTAA often lowers this to 10–15%, but only against the payee’s Tax Residency Certificate and Form 10F.
Rate source: Income Tax Department TDS rate chart
10%
Varies (10-40%); often reduced under DTAA
Threshold
From ₹1
Who deducts
Any Indian person making payment to a non-resident — covers all payers, not just companies.
No PAN
20% or the higher rate
Shows up in
Form 26AS & AIS, quarterly
What it looks like on a real payment
Worked exampleSec 195
Amount payable to you₹1,00,000
TDS @ 10%− ₹10,000
You receive₹90,000
The ₹10,000 is not lost — it is pre-paid tax, credited in your 26AS and adjusted at filing.
Assumes a DTAA rate of 10% on FTS, backed by the payee’s TRC and Form 10F. Without the treaty, FTS is deducted at 20% plus surcharge and cess; other payments can go higher.
Run your own numbersFree 195 calculator — invoice amount in, deduction and take-home out. No signup.What this means for you
From 1 April 2026, the Income-tax Act 2025 renumbers this as Section 393(2) Sl. 17. The rate and threshold are unchanged — only the citation moves.
Treaty rates by country
Where a DTAA gives a lower rate than the Act, the treaty rate applies — but only against a valid Tax Residency Certificate and Form 10F from the payee.
| Country | FTS | Royalty | Notes |
|---|---|---|---|
| United States | 15% | 15% | Article 12 (royalties + FTS). Lower rates for some classes of equipment royalty. |
| United Kingdom | 15% | 10%/15% | Article 13. 10% for equipment royalty; 15% for other royalty + FTS. |
| Singapore | 10% | 10% | Article 12. Among the lowest treaty rates — major destination for Indian outbound FTS. |
| United Arab Emirates | 10% | 10% | Article 12. UAE has no domestic income tax — TRC is critical to claim the treaty benefit. |
| Australia | 10% | 10%/15% | Article 12. 10% for industrial/scientific equipment; 15% for other royalty + FTS. |
| Canada | 10%/15% | 10%/15% | Article 12. Lower rate for specified classes of FTS / royalty; higher for general. |
| Netherlands | 10% | 10% | Article 12. MFN clause may reduce this further — check current Indo-Dutch protocol. |
| Germany | 10% | 10% | Article 12. Single rate for FTS, royalty, and equipment payments. |
When your client must deposit it — and report it
The client must deposit TDS by the 7th of the month after deduction (30 April for March). It reaches your 26AS only after they file the quarterly TDS statement (Form 27Q), due on these dates — which is why a deduction in March can be invisible until 31 May:
Form 27Q · quarterlyFY 2026–27
Q1 — Apr to Jun31 July
Q2 — Jul to Sep31 October
Q3 — Oct to Dec31 January
Q4 — Jan to Mar31 May
FAQ
What is the TDS rate under Section 195?
Who deducts TDS under Section 195?
What is the threshold for Section 195 TDS?
Is TDS under Section 195 deducted on the GST-inclusive amount?
How do I claim TDS deducted under Section 195 in my ITR?
Billing a foreign client? Read the export-of-services and LUT guide — when 195 bites, and how zero-rating works alongside it.
For the CA reading this
The deadline sheet you already send, with your name on it
Every statutory date for the month — GST returns, advance tax, and the dates your client's own customers owe them: when the TDS they withheld must reach the department, and when the certificate is due. Add your firm's name and forward it as it stands. No signup, no email, nothing to accept.
The image is the one that travels on WhatsApp. Dates are statutory, not advice — the sheet says which rows bind whom.
Sources
Rates as notified for FY 2026–27 and can change. General information, not tax advice. Verify with your CA before you file.
Related sections
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