Section 195: TDS on Payments to NRIs (Rates, DTAA & Common Mistakes) – FY 2025–26 Guide
Payments to Non-Resident Indians (NRIs) attract special tax treatment in India.Section 195 is one of the most critical and high-risk TDS provisions, as wrong deduction can block remittances, invite notices, and cause litigation. This WonderTax guide ...
Payments to Non-Resident Indians (NRIs) attract special tax treatment in India.
Section 195 is one of the most critical and high-risk TDS provisions, as wrong deduction can block remittances, invite notices, and cause litigation.
This WonderTax guide explains:
When Section 195 applies
TDS rates on different payments
DTAA benefits
Form 15CA / 15CB compliance
Practical examples
What Is Section 195?
Section 195 requires deduction of TDS on any sum chargeable to tax in India paid to:
NRIs
Foreign companies
👉 There is NO threshold limit under Section 195.
Common Payments Covered Under Section 195
| Payment Type | TDS Applicability |
| Rent to NRI | Yes |
| Professional / consultancy fees | Yes |
| Sale of property by NRI | Yes |
| Capital gains | Yes |
| Royalty / technical fees | Yes |
| Dividend / interest | Yes |
TDS Rates Under Section 195 (Indicative)
| Nature of Income | TDS Rate* |
| Long-term capital gains (property) | 20% + surcharge + cess |
| Short-term capital gains | 30% + surcharge + cess |
| Rent | 30% + surcharge + cess |
| Professional fees | 10% / DTAA rate |
*Actual rate depends on DTAA applicability.
DTAA Benefit (Very Important)
NRIs can claim lower TDS rates under Double Taxation Avoidance Agreements (DTAA).
Documents Required:
✔ Tax Residency Certificate (TRC)
✔ Form 10F
✔ PAN (mandatory)
👉 Without these, DTAA benefit cannot be claimed.
Example: Property Sale by NRI
Sale value: ₹1.2 crore
LTCG: ₹40 lakh
👉 TDS is NOT on sale value, but on capital gains
👉 Without CA certificate → buyer deducts TDS on full sale value (wrong but common)
WonderTax strongly recommends CA certification before remittance.
Form 15CA & 15CB Compliance
| Form | Purpose |
| Form 15CA | Declaration of remittance |
| Form 15CB | CA certificate (tax computation) |
Banks will not allow remittance without these.
Common Mistakes Under Section 195
Applying resident TDS sections (194I, 194J)
Deducting TDS on full sale value
Ignoring DTAA
Missing Form 15CA/CB
Late TDS deposit
Internal Links (WonderTax)
NRI Taxation & Compliance
https://wondertax.in/nri-taxationIncome Tax Notice Handling
https://wondertax.in/services/income-tax-notice-handlingCapital Gains on Property
https://wondertax.in/capital-gains-tax
CTA – WonderTax
👉 Making payments to an NRI or buying property from one?
