Withholding Tax for Telangana Businesses Paying Foreign Vendors and NRIs

Withholding tax on payments to non-residents follows national rules. But in Telangana, a few situations come up again and again because of the state's economy: technology companies paying foreign vendors, subsidiaries paying foreign parents, and property transactions with NRIs. This guide covers them.

Note: from 1 April 2026, withholding continues under the Income-tax Act, 2025, with renumbered provisions and forms.

Technology Companies Paying Foreign Vendors

Hyderabad's startups and technology firms pay foreign companies for cloud hosting, SaaS subscriptions, developer tools, advertising and consultants. Each needs a view on whether it's taxable in India — for example, standard software licences are often not treated as royalties, while some services may be taxable technical fees depending on the treaty. Documenting the position and handling 15CA/15CB before remitting avoids later demands.

Subsidiaries Paying Foreign Parents

Indian subsidiaries in Hyderabad — including global capability centres — pay foreign group companies for software licences, trademark royalties, management charges and dividends. These are usually taxable in India, often at treaty rates, and also need transfer pricing support.

NRI Landlords

Many Hyderabad flats and commercial properties are owned by NRIs. Tenants paying rent to an NRI landlord must withhold tax under the rules for non-residents, not the resident rent TDS rules — including individual tenants. This is one of the most common errors in the city.

Buying Property From NRIs

Buyers of property from NRI sellers must withhold tax on the payment under the non-resident rules, which usually means a much higher amount than the 1% resident rate, unless the seller obtains a lower deduction certificate. The buyer needs a TAN and must file the relevant quarterly return.

Local Practicalities

• Banks in Hyderabad ask for 15CA/15CB for most foreign remittances.
• Tax withheld is deposited and reported like other TDS, and certificates issued.
• Defaults are processed centrally, with follow-up possible through the department in Hyderabad.

A Checklist

1. Analyse each foreign vendor payment before remitting.
2. Check whether landlords and property sellers are NRIs.
3. Get a TAN if you need to withhold on NRI payments.
4. Collect TRC and Form 10F for treaty claims.
5. Deposit tax and file returns on time.

Getting Help

Think Filing handles withholding for Telangana businesses and individuals paying foreign parties and NRIs.