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How to Reduce TDS on International Payments

How to Reduce TDS on International Payments
rohit
Rohit4 January 2024

Tax Deducted at Source (TDS) on international payments in India is applicable when payments are made to non-residents. The rates of TDS and the specific provisions governing international payments are outlined in Section 195 of the Income Tax Act.

However, certain factors can allow you to reduce the TDS, which you will learn in this blog. 

Nature of payments and applicable rates: DTAA

DTAA is particularly relevant in international transactions, where income may be subject to taxation in both the source countries. DTAA covers the following categories: 

Nature of payments and applicable rates: DTAA
  • Salary 
  • Capital Gains 
  • Services 
  • Properties 
  • Savings 
  • FDs 

The rates depend on the tax treaties agreed upon by the two countries. The TDS rates on interest earned range from 7.50% TO 15%. 

What is the TDS return for foreign payments?

Under section 195, it is mandatory for any person making foreign payments to a non-resident to obtain a TAN and deduct tax at applicable rates. Once deducted, the payer must deposit the tax with the government against the payee's PAN. 

Furthermore, the payer must also fill out a TDS return using Form 27Q, which is a declaration of TDS deducted on payments other than salary to non-residents.  

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