Foreign software, royalty, professional fees, capital gains — when to deduct, what rate to apply, and how to file 15CA/CB without errors.
Section 195 is one of the most punishing provisions in the Income Tax Act. Get the rate wrong and the entire expense can be disallowed under Section 40(a)(i). Get the procedure wrong and the Form 15CA filing returns a defect. Here's how to handle TDS on payments to non-residents — cleanly, every time. Section 195 cases are handled inside our TDS and TCS return filing service.
| Payment | Section | Default rate |
|---|---|---|
| Royalty / Fees for Technical Services | 115A | 20% (10% under most DTAAs) |
| Software purchase (off-the-shelf) | — | Equalisation Levy 2% (or 195 if royalty) |
| Interest from Indian source | 195 | 20% or DTAA rate |
| Long-term capital gains on listed shares | 112A | 10% + surcharge |
| Short-term capital gains on listed shares | 111A | 15% + surcharge |
| Property sale by NRI | 195 | 20% LTCG / 30% STCG + surcharge |
| Dividend | 195 | 20% (DTAA may reduce to 10–15%) |
| Sports / entertainment payments | 194E | 20% |
Payments for digital advertising to non-resident advertising platforms (Google, Meta) attract 6% Equalisation Levy. From 2020, e-commerce supply of goods/services by non-residents to Indian residents attracted 2% — though this was withdrawn in Finance Act 2024 for most categories. Always verify current applicability.
For every cross-border remittance, the remitter must furnish information to the income-tax department via Form 15CA. Where the remittance is taxable in India and exceeds ₹5L in a year, Form 15CB (a CA's certificate) is also required.
| Scenario | Form needed |
|---|---|
| Remittance not taxable + in specified list | Part D of 15CA only |
| Remittance ≤ ₹5L in the year, taxable | Part A of 15CA |
| Remittance > ₹5L, with AO order / certificate | Part B of 15CA |
| Remittance > ₹5L, taxable, no AO order | Part C of 15CA + Form 15CB |
Banks will not process a foreign remittance without the 15CA / 15CB. Plan at least 3–5 working days for CA review, form generation and bank processing.
If TDS is not deducted, not deposited, or deposited late, 100% of the expense is disallowed for tax purposes. The disallowance reverses in the year of actual deposit — but the cash-flow hit is immediate and material.
If you over-deduct under 195, the deductee can apply for refund directly with the AO using Form 26B / 26A. Process is slow (6–12 months) — preferable to compute correctly upfront.
Cross-border TDS is procedural, not philosophical. Build a one-page SOP for each recurring payment type — software, SaaS, royalty, professional fees — and use it religiously. The cost of a single mis-deduction often exceeds the entire annual fees of a competent CA.
Senior contributor at Taxpex Consultancy. Reviewed by a practising Chartered Accountant. Published on 28 November 2025 · Updated on 28 November 2025.
TDS & TCS — done for you by Taxpex
Prefer a CA to handle this end to end? TDS & TCS Return Filing is our dedicated, fixed-fee service — this guide explains the process, that page gets it filed.
Go to TDS & TCS Return FilingDeduct, deposit and report TDS on time. We file 24Q (salary), 26Q (non-salary), 27Q (NRI) and 27EQ (TCS), reconcile with TRACES and issue Form 16 / 16A to your deductees.
All 30+ TDS sections, thresholds, rates and applicability — in one practical chart with notes on the recent rate cuts and Section 194T.
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Yes — monthly TDS, quarterly 24Q/26Q returns and Form 16 generation.
via Compliance ServicesForm 16 is for salary TDS (annual); Form 16A is for non-salary TDS (quarterly).
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