—Guide
TDS on Payments to Non-residents: Withholding Tax, 15CA and 15CB Explained
When payments to foreign vendors, consultants and group companies need withholding tax, how tax treaties apply, and the Form 15CA and 15CB process.
Indian businesses increasingly pay foreign parties — software vendors, consultants, advertising platforms, group companies. These payments often need tax withheld before the money leaves India, and a declaration filed with the bank. This guide explains the rules.
Note: this article describes the rules under the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026 (tax year 2026-27), with renumbered provisions and updated forms, so check the current position for later periods.
When Withholding Applies
A payer must withhold tax on any payment to a non-resident that is chargeable to tax in India. Whether it's chargeable depends on the nature of the payment — for example, royalties, fees for technical services and interest are often taxable in India — and on any tax treaty between India and the recipient's country.
Tax Treaties
India has double taxation avoidance agreements with many countries. Where a treaty applies, the non-resident can be taxed at the treaty rate if it's more beneficial. To claim treaty benefits, the recipient generally needs to provide:
- A tax residency certificate from their country.
- Form 10F with prescribed particulars.
- Often, a declaration that they don't have a permanent establishment in India.
Some treaties also narrow what counts as fees for technical services, which can take a payment out of Indian tax altogether.
No PAN
Where the non-resident doesn't have a PAN, the higher rate applies unless they provide the specified alternative documents.
Forms 15CA and 15CB
Before remitting money abroad, the payer files Form 15CA online, declaring the payment and tax withheld. For many taxable payments above specified limits, a Chartered Accountant's certificate in Form 15CB is needed first, certifying the nature of the payment, its taxability, and the rate of withholding. Banks ask for these before processing remittances.
Common Mistakes
- Assuming software subscriptions or online advertising aren't taxable in India without checking.
- Missing treaty documents, so the higher domestic rate applies.
- Paying the gross amount without withholding, making the payer liable for the tax and interest.
- Not filing the quarterly TDS return for non-resident payments.
Getting Help
Think Filing analyses foreign payments, applies treaty benefits, issues Form 15CB certificates, and files 15CA and TDS returns.