Withholding of Tax on Non-Residents

Tax Glossary Definition

Withholding of Tax on Non-Residents

Under Section 195 of the Income Tax Act, tax must be deducted at source (TDS) when making payments—such as royalties, interest, technical service fees, or other specified income—to a non-resident.

The applicable rate depends on the nature of payment and relevant Double Taxation Avoidance Agreement (DTAA) provisions, if any.

Example: When an NRI contractor is paid ₹1,00,000 for professional services, the payer must deduct TDS at 10% under Section 195 before remitting the amount.

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