TDS Technical fees pai o Foreign Co.

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Bharat Rajgor (Querist)
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26 May 2009 I just want to ask if I am paying Technical Assistance fees to Some XYZ Co.having their H.O.(based) in Japan then do I have to deuct TDS ? If yes then what will be the perentage and under what section I have to deduct and how to file TDS return for that?

taxindiaconnect

taxindiaconnect (Expert)
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26 May 2009 Section 195 of the Act casts an obligation on an resident tax payer making payment to a non resident in respect of an income taxable in India to withhold tax at the rates applicable.

Since as per section 9 the income of a resident by way of fees for technical fees will be deemed to accrue and arise in India, the income will be taxable in India.

Section 115 A of Income Tax Act provide a concessional rate of tax @ 10% on non resident earning income by way of royalty in India pursuant to a contract entered on or after 1st June 2005. Need not mention that the rate of tax also needs to be enhanced by the amount of applicable surcharge and the cess.

However As per section 90 of IT Act one can take the benefit of provision of Double taxation Avoidance Agreements ( DTAA) on the payment of royalty if the recipient of the income from technical fees is a resident of a country with whom India has a DTAA. Currently India has DTAA’s with more then 75 Countries. India has a DTAA with Japan and as per Japan article 12 of that treaty the tax rate is 10 %. On this no SC and EC is applied. Thus for the purpose of your query the rate of tax would be 10%.

You need to file a return of TDS for this and also to issue a TDS certificate.

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Bharat Rajgor

Bharat Rajgor (Querist)
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29 May 2009 Dear Rajesh thanks for your reply.My another doubt was that if that foreign co. holds PAN of India then also do we have to deduct the TDS under section 195 only ?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

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28 July 2025 Great question! Here's a clear summary regarding **TDS on Technical Fees paid to a foreign company (e.g., in Japan)**:

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### 1. **Do you need to deduct TDS?**

Yes, you must deduct TDS under **Section 195** of the Income Tax Act when you pay technical fees to a foreign company.

### 2. **What rate should be applied?**

* As per **Section 115A** and India-Japan DTAA (Double Taxation Avoidance Agreement), the tax rate on technical fees (royalty/technical services) paid to a non-resident is **10%**.
* No surcharge and no education cess apply on this rate as per the DTAA.

### 3. **What if the foreign company holds an Indian PAN?**

* Even if the foreign company has an **Indian PAN**, the TDS provisions under **Section 195** still apply.
* The presence of PAN does **not exempt** TDS deduction; it only affects the TDS deduction rate in some cases (e.g., for residents). For non-residents, TDS is mandatory on payments chargeable to tax in India.

### 4. **How to file TDS return?**

* File TDS return using **Form 27Q** (TDS on payments to non-residents).
* Issue **TDS certificate (Form 16A)** to the foreign company.

### 5. **Additional notes:**

* The TDS must be deducted **at the time of credit or payment, whichever is earlier**.
* If the foreign company claims benefit under DTAA, ensure you get necessary documents like Tax Residency Certificate (TRC).
* The foreign company can claim credit of TDS in their home country under DTAA provisions.

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If you want, I can help you draft the exact procedure for TDS filing or the documentation needed for DTAA benefits! Would you like that?

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