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What is the tds rate applicable for payment to NON resident

S.Ramakrishnan (Manager -Finance & Accounts) (62 Points)

11 October 2019

Dear Experts

Good afternoon

We are paying tds to non residents at the rate of 10.92% (inclusive of surcharge and cess). But as per the DTAA agreement we heard that the tds has to been paid only 10% and no surcharge and cess.

Will anybody tell us what rate actually we have to charge?

Thanks & Regards

S.Ramakrishnan

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4 Replies

Kewal Sharma (2 Points)
Replied 11 October 2019

In case you are taking a benefit of tax treaty 10 percent can be applied. Since surcharge and cess applies as per the Act. This position is also strengthened by various judicial precedents. Further in case of no pan 20 percent would be applicable. for that you can see the rule for having other docs such as email address, trc etc

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 11 October 2019

1. TDS for non-residents mostly depend upon the nature of income earned by such non-residents.
2. Typically sec 195 deals with TDS rates for Non-resident. While deducting TDS as per IT act surcharge and Edu cess shall also be included as a part of tax deduction.
3. However, if DTAA prescribes a lower rate for deduction of tax then the DTAA rate shall prevail over the IT rate.
4. In your case, TDS shall be deducted @ 10% flat on payment made to a non-resident.
Please correct me if the above solution has an alternative view.

CA Arun Tiwari (Partner) (5855 Points)
Replied 25 January 2020

Sec 195 of the Income Tax requires TDS to be deducted by 20 % or DTAA rate (as in force ) whichever is beneficial to the Assessee. And this rate will strengthen by 3% (HEC).

So this rate 10.92 % is appropriate as per the DTAA rate.

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