TDS on Payments to Non-Residents: Rates, Forms and Due Dates (Income Tax Act 2025)

Tax on payments to non-residents is deducted under section 393(2) of the Income-tax Act, 2025. The table in that sub-section lists the payee, the payer and the rate. Some items carry a fixed rate (for example 20%, 10%, 5% or 12.5%). The catch-all item, Sl. No. 17, says "rates in force", and it covers any interest or other sum chargeable under the Act, other than salary.

Whoever pays (an Indian company, a resident individual, a firm, anyone) has to deduct at the earlier of credit or payment. This guide covers which row applies, how to compute the deduction, when to deposit, and which forms the Rules require. Figures come from the Act as amended by the Finance Act, 2026 and the Income-tax Rules, 2026, with section and rule numbers beside them. Last reviewed on 10 November 2026.

Which payments to a non-resident attract TDS under section 393(2)?

Section 393(2) applies when a sum is credited or paid to a non-resident payee and it falls in column B of the table. Tax is deducted at the rate in column E, at the time of credit to the payee's account or payment in cash, cheque, draft or any other mode, whichever is earlier (section 393(2)(b)). The main rows are:

Sl. No.	Income or sum	Payee	Payer	Rate
1	Income referred to in section 211 (participation in India in a game or sport, advertisement, articles on sport in newspapers or journals; amounts guaranteed to a sports association)	Non-citizen non-resident sportsman or entertainer; non-resident sports association or institution	Any person	20%
2	Interest on money borrowed in foreign currency from outside India under a loan agreement or long-term infrastructure bond (on or after 1 July 2012, before 1 July 2023) or a long-term bond (on or after 1 October 2014, before 1 July 2023), approved by the Central Government	Non-resident (not a company) or foreign company	Indian company or business trust	5%
3	Interest on money borrowed from outside India by issue of a rupee denominated bond before 1 July 2023	Non-resident (not a company) or foreign company	Indian company or business trust	5%
4	Interest on a long-term bond or rupee denominated bond listed only on a recognised stock exchange in an International Financial Services Centre	Non-resident (not a company) or foreign company	Indian company or business trust	4% (issued on or after 1 April 2020 and before 1 July 2023) or 9% (issued on or after 1 July 2023)
5	Interest	Non-resident (not a company) or foreign company	Infrastructure debt fund (Schedule VII, Sl. No. 46)	5%
6	Distributed income under section 223 (Schedule V, Sl. No. 3)	Non-resident unit holder (not a company) or foreign company	Business trust	5% for Sl. No. 3.B(a) income; 10% for Sl. No. 3.B(b) income
7, 8, 9	Distributed income (Schedule V, Sl. No. 4); investment fund income under section 224; securitisation trust income under section 221	Non-resident unit holder or investor (not a company) or foreign company	Business trust, investment fund, securitisation trust	Rates in force
10	Income from units of a Mutual Fund (Schedule VII, Sl. No. 20 or 21) or from units of the specified company	Non-resident (not a company) or foreign company	Any person	As per Note 2 (20%, or lower treaty rate)
11, 12	Income from units under section 208; long-term capital gains on transfer of those units	Offshore fund	Any person	10% (income); 12.5% (long-term capital gains)
13, 14	Interest or dividends on bonds or GDRs under section 209; long-term capital gains on their transfer	Any non-resident	Any person	10% (interest or dividends); 12.5% (long-term capital gains)
15, 16	Income from securities under section 210(1) (Sl. No. 1)	Foreign Institutional Investor (Sl. No. 15); specified fund (Sl. No. 16)	Any person	As per Note 2 (Sl. No. 15); 10% (Sl. No. 16)
17	Any interest (other than Sl. Nos. 2 to 5) or any other sum chargeable under the Act, not being salary	Non-resident (not a company) or foreign company	Any person	Rates in force

Sl. No. 17 is the row most businesses meet in practice. The Act itself does not print a percentage there. It points to the rates in force for that payee and that income, which are set by the Finance Act, and which may be lower under a tax treaty. I have not listed those percentages here because they are not in the Act text this guide is built from. Take the current figure from the Finance Act or the applicable treaty, or from your CA.

Does TDS apply even if the non-resident has no office in India?

Yes. Note 3(b) to the table says the duty to deduct under Sl. No. 17 extends to all persons, resident or non-resident, whether or not the non-resident has a residence, place of business or business connection in India, or any other presence in India. So an Indian startup paying a foreign vendor, or a foreign company paying another foreign company, falls under the same obligation if the sum is chargeable under the Act.

One timing difference: where the interest under Sl. No. 17 is payable by the Government, a public sector bank or a public financial institution, tax is deducted only at the time of payment (Note 3(a)).

How do I decide which row and rate applies?

If the answer to the first question is no (the sum is not chargeable in India), the payer usually still has information duties under rule 220 (Form 145, Part D), covered below, unless rule 220(3) exempts the remittance.

How is TDS on a non-resident payment calculated? Three worked examples

All three use tax year 2026-27 and the fixed rates printed in section 393(2).

Example 1: interest on a rupee denominated bond (Sl. No. 3). Assumptions: an Indian company issued a rupee denominated bond to a foreign company lender before 1 July 2023. It pays Rs 12,00,000 interest in the tax year. The interest does not exceed the amount at the rate approved by the Central Government (Note 1).

Step	Working	Amount (Rs)
1. Interest payable	As per bond terms	12,00,000
2. Rate	Sl. No. 3	5%
3. Tax to deduct	12,00,000 x 5%	60,000
4. Net remitted to lender	12,00,000 - 60,000	11,40,000

Example 2: tax borne by the payer (section 393(10)). Assumptions: an Indian event company guarantees a non-citizen, non-resident sportsman a net Rs 9,00,000 for participating in a game in India, and agrees to bear the tax. The rate is 20% (Sl. No. 1). Where the payer bears the tax, the income is increased to an amount which, after deduction, equals the net amount payable.

Step	Working	Amount (Rs)
1. Net amount agreed	As per agreement	9,00,000
2. Gross income	9,00,000 / (1 - 0.20)	11,25,000
3. Tax deducted	11,25,000 x 20%	2,25,000
4. Check: gross less tax	11,25,000 - 2,25,000	9,00,000

Example 3: capital gains on GDRs (Sl. No. 14). Assumptions: a non-resident investor transfers Global Depository Receipts of the kind covered by section 209 (purchased in foreign currency) and the long-term capital gain paid out is Rs 8,00,000. Tax at 12.5% is Rs 1,00,000 (8,00,000 x 12.5%), so Rs 7,00,000 is the net.

Real-life scenarios

Ravi, a Pune software firm, pays a foreign design studio. The studio has no office or staff in India. Ravi assumes no tax applies because the work was done abroad. Whether the fee is chargeable in India depends on the Act and the relevant treaty, and Note 3(b) removes the "no presence" argument for the duty to deduct. Ravi's CA reviews the nature of the payment first. If the whole sum is not chargeable, Ravi files information in Part D of Form 145 instead of deducting, unless rule 220(3) exempts the remittance.

Meena's company wants to remit only the taxable part. A foreign vendor's invoice mixes a taxable fee and a reimbursement that is not income in India. Under section 395(2), Meena's company may apply to the Assessing Officer in Form 129 to determine what proportion is chargeable. Once the officer certifies it, tax is deducted under Sl. No. 17 on that proportion only (rule 214).

What if the non-resident has no PAN?

Section 397(2) requires every payee to give a valid PAN. Without it, tax is deducted at the higher of the rate in the relevant provision, the rate or rates in force, or 20% (in any case other than the 5% cases for 393(1) Sl. No. 8(ii) and 8(v)). For a non-resident (not a company) or a foreign company, rule 217 switches off this higher rate for interest, royalty, fees for technical services, dividend and capital-asset transfer payments if the payee gives the deductor:

• name, e-mail ID and contact number;
• address in the country or specified territory of residence;
• a tax residency certificate from that government, if its law provides for one; and
• its tax identification number there, or a unique identifying number if none exists.

The higher rate also does not apply to a non-resident who is not required to apply for PAN under section 262 and the rules (rule 217(3)). Separately, section 397(2)(c)(i) exempts interest on long-term bonds under Sl. Nos. 2, 3 and 4 from this higher-rate rule.

Can a non-resident get a lower or nil deduction?

Yes, in two ways.

• Treaty rate. For Sl. No. 10 and 15, Note 2 says deduct 20%, or the lower rate in an agreement under section 159 if the payee has furnished a residency certificate under section 159(8). Treaty relief generally requires that certificate and other prescribed documents.
• Certificate from the Assessing Officer. The payee may apply in Form 128 under section 395(1) for a lower rate or nil deduction (rule 213). The certificate is valid only for the deductor, payment and period stated, and the payer must then deduct at the certificate rate (section 395(1)(c)).

Section 393(8) separately says no tax is deducted from interest paid by an Offshore Banking Unit on borrowing or deposits made on or after 1 April 2005 by a non-resident or a person not ordinarily resident.

When must the tax be deposited and which forms are needed?

Step	Rule	Deadline
Deposit the tax	Rule 218(2)	Within 7 days from the end of the month of deduction (7th of next month); 30 April for deductions made in March
Deposit for non-resident immovable property purchases by a resident individual or HUF (Sl. No. 17)	Rule 218(3)(e)	Within 30 days from the end of the month, with challan-cum-statement in Form 141 (this clause (e) applies w.e.f. 1 October 2026; Form 141 replaces the quarterly statement for these deductions)
Quarterly statement (Form 144 for deductees in rule 219(1) Sl. No. 2; Form 140 for others)	Rule 219(1), (4)	31 July, 31 October, 31 January, 31 May
TDS certificate to the payee (Form 131; Form 132 for the immovable property case above)	Rule 215(1)	Within 15 days of the due date of the quarterly statement (Form 132: of the Form 141 due date)
Information on remittance (Form 145)	Rule 220	Before remitting, to the authorised dealer

Rule 220(1) sets the Form 145 parts: Part A if payments in the tax year do not exceed Rs 5,00,000; Part B if they exceed Rs 5,00,000 and a certificate or order is obtained from the Assessing Officer under section 395(1) or (2); Part C if they exceed Rs 5,00,000 and a Form 146 certificate from an accountant is obtained. Part D applies to sums not chargeable under the Act. Rule 220(3) exempts some remittances from furnishing, including those by an individual that need no prior RBI approval under FEMA and the listed purpose codes.

What happens if tax is not deducted or deposited on time?

The table in section 393(2) has no minimum payment threshold, so the duty arises on the first rupee that is chargeable. If the payer does not deduct, or deducts and does not deposit, section 398(1) deems the payer an assessee in default. Section 398(3) adds simple interest: 1% for every month or part of a month from the date the tax was deductible to the date it is deducted, and 1.5% for every month or part of a month from deduction to actual payment. The interest must be paid before the statement is furnished.

Example 4: late deduction and deposit. Assumptions: tax of Rs 60,000 was deductible on 15 December 2026, was deducted on 20 January 2027 and was deposited on 5 February 2027.

Period	Rate	Months or part	Interest (Rs)
15 Dec to 20 Jan (deductible to deducted)	1%	2	60,000 x 1% x 2 = 1,200
20 Jan to 5 Feb (deducted to paid)	1.5%	1	60,000 x 1.5% x 1 = 900
Total interest			2,100

Section 398(2) gives relief: the payer is not treated as in default if the payee has filed its return, included the income and paid the tax, and the payer obtains an accountant's certificate. Interest at 1% then runs only until the payee files the return (section 398(3)(c)). An order deeming default cannot be made after six years from the end of the tax year in which the tax was deductible, or two years from the end of the tax year of the correction statement, whichever is later (section 398(5)). Penalty under section 412 needs the Assessing Officer to be satisfied there was no good and sufficient reason (section 398(7)).

Common mistakes

• Skipping deduction because the foreign payee has no Indian office. Note 3(b) removes that argument for Sl. No. 17.
• Treating credit as the trigger only when cash moves. Credit to the payee's account, including a suspense account entry (section 393(11)), counts if earlier.
• Forgetting to gross up when the contract says the payer bears the tax (section 393(10)).
• Applying a treaty rate without a residency certificate under section 159(8).
• Not collecting PAN or the rule 217 details, which can trigger the higher deduction rate.
• Filing Form 140 for a payee that rule 219 puts in Form 144, or missing Form 145 before remittance.

Quick reference

Item	Reference	Detail
Deduct at	Section 393(2)(b)	Earlier of credit or payment
Catch-all rate	393(2), Sl. No. 17	Rates in force
Lower deduction application	Rule 213	Form 128
Chargeable proportion application	Rule 214	Form 129
No-PAN higher rate	Section 397(2)	Higher of the three rates; rule 217 relief
Quarterly statement	Rule 219	Form 144 or 140

Frequently asked questions

See the questions below the article. Details on rent, professional fees and the full rate chart are in our other guides: TDS on rent, TDS on professional fees and technical services and the section 393 rates chart.

Where this is in the Act

• Section 393(2), Table Sl. Nos. 1 to 17 and Notes 1 to 3: payments to non-residents
• Section 393(8), (10), (11): OBU interest, tax borne by payer, suspense account credit
• Section 398(1), (2), (3), (5), (7): default, interest and time limit
• Section 395(1), (2), (4): lower deduction, chargeable proportion, TDS certificate
• Section 397(2): PAN requirement and higher rate
• Section 159(8): residency certificate for treaty relief; sections 208, 209, 210, 211: the income types behind Sl. Nos. 1 and 10 to 16
• Rules 213, 214, 215, 217, 218, 219, 220

For a CA firm, the hard part is tracking which foreign payments each client made, which have a residency certificate on file and which quarterly statements are due. Finexo's practice management software keeps client deadlines and document checklists in one place. It does not compute TDS or file the forms for you. This article is general information, not tax advice.