Paying Abroad? 20% TDS Default Could Cost You
If you pay salary, rent, or fees to someone outside India, you must deduct TDS under Section 195. Miss the paperwork — Form 15CA, 15CB, or 27Q — and the tax department can penalise you heavily, even if the non-resident owes no tax.
Skipping Form 15CA can freeze your ₹5 lakh foreign payment — costlier than a month's EMI.
Your payment to a foreign vendor could trigger this deduction by default
Key Takeaways
Check whether the country you are remitting to has a Double Tax Avoidance Agreement (DTAA) with India — this could reduce your TDS rate from the default 20% to as low as 10% or even nil.
File Form 15CA on the income tax e-filing portal before initiating any foreign remittance, and get Form 15CB certified by a CA if the payment exceeds ₹5 lakh in the financial year.
File Form 27Q (not 26Q) for all TDS deducted on non-resident payments before the quarterly deadline — 31 July, 31 October, 31 January, and 31 May — to avoid the ₹200/day late fee.
If you pay salary, rent, or fees to someone outside India, you must deduct TDS under Section 195. Miss the paperwork — Form 15CA, 15CB, or 27Q — and the tax department can penalise you heavily, even if the non-resident owes no tax.
Here's what happened: Section 195 of the Income Tax Act requires any person making a taxable payment to a non-resident to deduct TDS before transferring money abroad.. Form 15CA (self-declaration) and Form 15CB (CA certificate) are mandatory paperwork for most foreign remittances; filing them online on the income tax portal is a legal requirement before the bank processes the transfer.. TDS on non-resident payments must be reported in Form 27Q quarterly; errors or late filing attract a penalty of ₹200 per day plus potential prosecution under Section 276B..
What you should do: Check whether the country you are remitting to has a Double Tax Avoidance Agreement (DTAA) with India — this could reduce your TDS rate from the default 20% to as low as 10% or even nil.. File Form 15CA on the income tax e-filing portal before initiating any foreign remittance, and get Form 15CB certified by a CA if the payment exceeds ₹5 lakh in the financial year.. File Form 27Q (not 26Q) for all TDS deducted on non-resident payments before the quarterly deadline — 31 July, 31 October, 31 January, and 31 May — to avoid the ₹200/day late fee..
If the non-resident provides a Tax Residency Certificate (TRC) from their home country, you can apply the lower DTAA rate directly — without waiting for a nil-deduction certificate from the Indian tax department.
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This article is reported by GoCredit's Editorial Team based on the source above. GoCredit synthesises, contextualises, and adds India-borrower-relevant analysis. We are not the original publisher.
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