In March 2026 I remitted a fee to a company outside India without deducting anything, because I did not think any part of it was taxable here. The Assessing Officer now says section 195 obliged me to deduct on the whole remittance, or at least to apply to him before paying. Does section 195 say that — and since the new Act has come in, which Act governs my payment at all?
Which Act governs is settled by one date: on the CBDT's transition FAQ, where the earlier of credit or payment falls on or before 31 March 2026 the Income-tax Act, 1961 applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies instead — there, the deduction duty sits in section 393(2), Table, Serial No. 17. So a March 2026 remittance is a section 195 question. Section 195(1) does not tax a remittance; it attaches a deduction duty to “any interest … or any other sum chargeable under the provisions of this Act” paid to a non-resident or a foreign company, at the time of credit or of payment, whichever is earlier. Those five words are the gateway, and in GE India Technology Centre the Supreme Court held on 9 September 2010 that they cannot be read out of the sub-section: a payer who is fairly certain that no part of the sum is chargeable in India may make that determination himself and is not obliged to apply under section 195(2) first. Section 195(2) is the payer's application where a composite payment is partly chargeable; section 197 is a different route, taken by the recipient. Sub-section (6) requires information about every sum, whether or not chargeable, in the form prescribed by rule 37BB — which is why the bank asks for a 15CA even where nothing is deductible.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Section 195 of the Income-tax Act, 1961, as amended up to 2025. It bears on section 195, section 195(1), section 195(2), section 195(3), section 195(6), section 195(7), section 393 (Act of 2025), section 395 (Act of 2025), section 397 (Act of 2025), section 398 (Act of 2025), section 197, section 206AA, section 90, section 9(1), section 40(a)(i), section 201(1), section 201(1A), section 201(1) first proviso, section Rule 37BB, section 115-O, section 194LC of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Section 195 is the only TDS provision in which the payer has to decide a question of chargeability before he can decide a rate, and the two things get collapsed. The words that do the work are “any other sum chargeable under the provisions of this Act”. In GE India Technology Centre the Supreme Court refused to read them out: if the Department were right that the moment there is a remittance the obligation to deduct arises, the Court said, “we are obliterating the words ‘chargeable under the provisions of the Act’ in Section 195(1)”. The same judgment disposes of the argument that a payer must go to the Assessing Officer first — sub-section (2) “pre-supposes that the person responsible for making the payment to the non-resident is in no doubt that tax is payable in respect of some part of the amount” but is unsure of the proportion, so a payer who is fairly certain nothing is chargeable can make his own determination. Read the statute in that order: chargeability under sections 4, 5 and 9 first, then the treaty under section 90(2), which applies the Act only “to the extent they are more beneficial to that assessee”, and only then a rate. The amendment history is where people come unstuck, in three places. Explanation 2, inserted by the Finance Act, 2012 with retrospective effect from 1 April 1962, is read by assessing officers as if it made every cross-border payment taxable. It does not. It says the obligation “applies … and extends … to all persons, resident or non-resident, whether or not the non-resident person has a residence or place of business or business connection in India” — it fixes the territorial reach of the DUTY, so a non-resident payer cannot say the section does not reach him. It leaves the chargeable-sum gateway exactly where it was, which is why GE India, decided in 2010, was not displaced by a 2012 amendment backdated to 1962. That is the settled reading, and we found no considered authority the other way — but it is the reading assessing officers most often argue against, so expect to have to make it rather than assume it. Second, sub-section (6) has said “whether or not chargeable under the provisions of this Act” only since 1 June 2015; the reporting duty and the deduction duty are different duties with different triggers, and furnishing a 15CA is not an admission that anything was deductible. Third, the second proviso that kept section 115-O dividends out of the section was omitted with effect from 1 April 2020, so a dividend paid to a non-resident on or after that date is inside section 195 and any advice written on the older text is wrong for it. Price the failure before you decide: no deduction means disallowance under section 40(a)(i), assessee-in-default status under section 201(1) and interest under section 201(1A) at one per cent a month from deductibility to deduction and one and one-half per cent a month from deduction to payment; and where the payee has no PAN, section 206AA(1) floors the rate at twenty per cent unless rule 37BC applies. None of this stops on 1 April 2026; it moves. Under the Income-tax Act, 2025 the deduction duty on a payment to a non-resident is section 393(2), Table, Serial No. 17 — which carries the same gateway words, “any other sum chargeable under the provisions of this Act”, so the reasoning in GE India travels with it. The payer's application for a determination of the chargeable proportion becomes section 395(2), the 15CA and 15CB information becomes section 397(3)(d), and assessee-in-default status and the one per cent and one and one-half per cent interest become section 398.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 195, under the marginal note “Other sums”, reads: (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC or section 194LD) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries”) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode. Explanation 1.—For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has— (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. (3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. (6) The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed. (7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of the sum which is so chargeable. The machinery that runs with the section is noted against each sub-section. Against sub-section (1): rules 26, 28, 28AA, 28AB, 29B, 29BA, 30, 31, 31A, 37BA and 37BB, and Form Nos. 13, 15C, 15CA, 15CB, 15CC, 15D, 15E, 16A, 24G, 26B, 27A and 27Q. Against sub-section (3): rule 29B and Form Nos. 15C and 15D. Against sub-section (6): rule 37BB and Form Nos. 15CA, 15CB and 15CC.
Section 195 governs a sum whose credit or payment, whichever is earlier, falls on or before 31 March 2026. For a sum credited or paid on or after 1 April 2026 the Income-tax Act, 2025 governs instead, and the corresponding provision is section 393(2), Table, Serial No. 17 of that Act. What follows is the 1961 Act text for a payment inside its period, as printed on the Year 2025 departmental page. The duty in sub-section (1) falls on any person responsible for paying a non-resident or a foreign company; it bites on interest and on any other sum chargeable under the Act, excluding salary and excluding interest referred to in sections 194LB, 194LC and 194LD; it is triggered at credit or payment, whichever is earlier, with credit to an interest payable or suspense account deemed by Explanation 1 to be credit to the payee; and the rate is the rate in force. The single proviso defers the trigger to payment alone for interest payable by the Government, a public sector bank within clause (23D) of section 10 or a public financial institution within that clause. Sub-section (2) lets the PAYER apply to the Assessing Officer for a determination of the chargeable proportion of a composite sum; sub-sections (3) and (4) let the RECIPIENT obtain a nil-deduction certificate that binds every payer while it is in force; sub-section (5) is the rule-making power behind it; sub-section (6) requires information on every sum, chargeable or not; sub-section (7) lets the Board notify a class of persons or cases who must go to the Assessing Officer even for a sum not chargeable. What changed, and when, on the departmental footnote apparatus. The last change to the section's own text was the omission of the second proviso, which had excluded dividends referred to in section 115-O, by Act No. 12 of 2020 with effect from 1 April 2020 — that is the date the text stated here took effect, and it governed until the section itself ceased to apply to sums credited or paid on or after 1 April 2026. That proviso had an earlier life: it was first inserted by the Finance Act, 1997 with effect from 1 June 1997, omitted by the Finance Act, 2002 with effect from 1 June 2002, re-inserted by the Finance Act, 2003 with effect from 1 April 2003, and omitted again in 2020. In sub-section (2) and again in sub-section (7), the words “to the Assessing Officer to determine, by general or special order” were substituted by Act No. 23 of 2019 with effect from 1 November 2019 by the present “in such form and manner … to determine in such manner, as may be prescribed” formula. Sub-section (6) was substituted by Act No. 20 of 2015, the Finance Act, 2015, with effect from 1 June 2015, replacing a narrower sub-section inserted by the Finance Act, 2008 with effect from 1 April 2008 which had reached only “the person referred to in sub-section (1)” and “any sum”; the substituted text is what added the words “whether or not chargeable under the provisions of this Act”. Sub-section (7) was inserted by the Finance Act, 2012 with effect from 1 July 2012. The old single Explanation was renumbered as Explanation 1 and Explanation 2 was inserted, both by the Finance Act, 2012 and both with retrospective effect from 1 April 1962. The words “or section 194LD” in sub-section (1) were inserted by the Finance Act, 2013 with effect from 1 June 2013.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved.
Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has— (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India.
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Handle my notice → Ask a CA on WhatsAppWhich Act governs is settled by one date: on the CBDT's transition FAQ, where the earlier of credit or payment falls on or before 31 March 2026 the Income-tax Act, 1961 applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies instead — there, the deduction duty sits in section 393(2), Table, Serial No. 17. So a March 2026 remittance is a section 195 question. Section 195(1) does not tax a remittance; it attaches a deduction duty to “any interest … or any other sum chargeable under the provisions of this Act” paid to a non-resident or a foreign company, at the time of credit or of payment, whichever is earlier. Those five words are the gateway, and in GE India Technology Centre the Supreme Court held on 9 September 2010 that they cannot be read out of the sub-section: a payer who is fairly certain that no part of the sum is chargeable in India may make that determination himself and is not obliged to apply under section 195(2) first. Section 195(2) is the payer's application where a composite payment is partly chargeable; section 197 is a different route, taken by the recipient. Sub-section (6) requires information about every sum, whether or not chargeable, in the form prescribed by rule 37BB — which is why the bank asks for a 15CA even where nothing is deductible. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 195, section 195(1), section 195(2), section 195(3), section 195(6), section 195(7), section 393 (Act of 2025), section 395 (Act of 2025), section 397 (Act of 2025), section 398 (Act of 2025), section 197, section 206AA, section 90, section 9(1), section 40(a)(i), section 201(1), section 201(1A), section 201(1) first proviso, section Rule 37BB, section 115-O, section 194LC of the Income Tax Act 1961. It is reported as Section 195 of the Income-tax Act, 1961, as amended up to 2025. Section 195 is the only TDS provision in which the payer has to decide a question of chargeability before he can decide a rate, and the two things get collapsed. The words that do the work are “any other sum chargeable under the provisions of this Act”. In GE India Technology Centre the Supreme Court refused to read them out: if the Department were right that the moment there is a remittance the obligation to deduct arises, the Court said, “we are obliterating the words ‘chargeable under the provisions of the Act’ in Section 195(1)”. The same judgment disposes of the argument that a payer must go to the Assessing Officer first — sub-section (2) “pre-supposes that the person responsible for making the payment to the non-resident is in no doubt that tax is payable in respect of some part of the amount” but is unsure of the proportion, so a payer who is fairly certain nothing is chargeable can make his own determination. Read the statute in that order: chargeability under sections 4, 5 and 9 first, then the treaty under section 90(2), which applies the Act only “to the extent they are more beneficial to that assessee”, and only then a rate. The amendment history is where people come unstuck, in three places. Explanation 2, inserted by the Finance Act, 2012 with retrospective effect from 1 April 1962, is read by assessing officers as if it made every cross-border payment taxable. It does not. It says the obligation “applies … and extends … to all persons, resident or non-resident, whether or not the non-resident person has a residence or place of business or business connection in India” — it fixes the territorial reach of the DUTY, so a non-resident payer cannot say the section does not reach him. It leaves the chargeable-sum gateway exactly where it was, which is why GE India, decided in 2010, was not displaced by a 2012 amendment backdated to 1962. That is the settled reading, and we found no considered authority the other way — but it is the reading assessing officers most often argue against, so expect to have to make it rather than assume it. Second, sub-section (6) has said “whether or not chargeable under the provisions of this Act” only since 1 June 2015; the reporting duty and the deduction duty are different duties with different triggers, and furnishing a 15CA is not an admission that anything was deductible. Third, the second proviso that kept section 115-O dividends out of the section was omitted with effect from 1 April 2020, so a dividend paid to a non-resident on or after that date is inside section 195 and any advice written on the older text is wrong for it. Price the failure before you decide: no deduction means disallowance under section 40(a)(i), assessee-in-default status under section 201(1) and interest under section 201(1A) at one per cent a month from deductibility to deduction and one and one-half per cent a month from deduction to payment; and where the payee has no PAN, section 206AA(1) floors the rate at twenty per cent unless rule 37BC applies. None of this stops on 1 April 2026; it moves. Under the Income-tax Act, 2025 the deduction duty on a payment to a non-resident is section 393(2), Table, Serial No. 17 — which carries the same gateway words, “any other sum chargeable under the provisions of this Act”, so the reasoning in GE India travels with it. The payer's application for a determination of the chargeable proportion becomes section 395(2), the 15CA and 15CB information becomes section 397(3)(d), and assessee-in-default status and the one per cent and one and one-half per cent interest become section 398. If it applies to you, the first step is this: Decide chargeability before you decide a rate. Work out whether the sum is income accruing or arising, or deemed under section 9(1), to the non-resident, and only then look for a rate. If no part of it is chargeable, section 195(1) does not attach.
Section 195, under the marginal note “Other sums”, reads: (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC or section 194LD) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries”) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode. Explanation 1.—For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has— (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. (3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. (6) The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall furnish the information relating to payment of such sum, in such form and manner, as may be prescribed. (7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of the sum which is so chargeable. The machinery that runs with the section is noted against each sub-section. Against sub-section (1): rules 26, 28, 28AA, 28AB, 29B, 29BA, 30, 31, 31A, 37BA and 37BB, and Form Nos. 13, 15C, 15CA, 15CB, 15CC, 15D, 15E, 16A, 24G, 26B, 27A and 27Q. Against sub-section (3): rule 29B and Form Nos. 15C and 15D. Against sub-section (6): rule 37BB and Form Nos. 15CA, 15CB and 15CC. The matter was decided on 2020-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Section 195 governs a sum whose credit or payment, whichever is earlier, falls on or before 31 March 2026. For a sum credited or paid on or after 1 April 2026 the Income-tax Act, 2025 governs instead, and the corresponding provision is section 393(2), Table, Serial No. 17 of that Act. What follows is the 1961 Act text for a payment inside its period, as printed on the Year 2025 departmental page. The duty in sub-section (1) falls on any person responsible for paying a non-resident or a foreign company; it bites on interest and on any other sum chargeable under the Act, excluding salary and excluding interest referred to in sections 194LB, 194LC and 194LD; it is triggered at credit or payment, whichever is earlier, with credit to an interest payable or suspense account deemed by Explanation 1 to be credit to the payee; and the rate is the rate in force. The single proviso defers the trigger to payment alone for interest payable by the Government, a public sector bank within clause (23D) of section 10 or a public financial institution within that clause. Sub-section (2) lets the PAYER apply to the Assessing Officer for a determination of the chargeable proportion of a composite sum; sub-sections (3) and (4) let the RECIPIENT obtain a nil-deduction certificate that binds every payer while it is in force; sub-section (5) is the rule-making power behind it; sub-section (6) requires information on every sum, chargeable or not; sub-section (7) lets the Board notify a class of persons or cases who must go to the Assessing Officer even for a sum not chargeable. What changed, and when, on the departmental footnote apparatus. The last change to the section's own text was the omission of the second proviso, which had excluded dividends referred to in section 115-O, by Act No. 12 of 2020 with effect from 1 April 2020 — that is the date the text stated here took effect, and it governed until the section itself ceased to apply to sums credited or paid on or after 1 April 2026. That proviso had an earlier life: it was first inserted by the Finance Act, 1997 with effect from 1 June 1997, omitted by the Finance Act, 2002 with effect from 1 June 2002, re-inserted by the Finance Act, 2003 with effect from 1 April 2003, and omitted again in 2020. In sub-section (2) and again in sub-section (7), the words “to the Assessing Officer to determine, by general or special order” were substituted by Act No. 23 of 2019 with effect from 1 November 2019 by the present “in such form and manner … to determine in such manner, as may be prescribed” formula. Sub-section (6) was substituted by Act No. 20 of 2015, the Finance Act, 2015, with effect from 1 June 2015, replacing a narrower sub-section inserted by the Finance Act, 2008 with effect from 1 April 2008 which had reached only “the person referred to in sub-section (1)” and “any sum”; the substituted text is what added the words “whether or not chargeable under the provisions of this Act”. Sub-section (7) was inserted by the Finance Act, 2012 with effect from 1 July 2012. The old single Explanation was renumbered as Explanation 1 and Explanation 2 was inserted, both by the Finance Act, 2012 and both with retrospective effect from 1 April 1962. The words “or section 194LD” in sub-section (1) were inserted by the Finance Act, 2013 with effect from 1 June 2013.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has— (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India."
It was decided by the CBDT Circulars & Instructions on 2020-04-01 and is reported as Section 195 of the Income-tax Act, 1961, as amended up to 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 195, section 195(1), section 195(2), section 195(3), section 195(6), section 195(7), section 393 (Act of 2025), section 395 (Act of 2025), section 397 (Act of 2025), section 398 (Act of 2025), section 197, section 206AA, section 90, section 9(1), section 40(a)(i), section 201(1), section 201(1A), section 201(1) first proviso, section Rule 37BB, section 115-O, section 194LC, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Section 195 governs a sum whose credit or payment, whichever is earlier, falls on or before 31 March 2026. For a sum credited or paid on or after 1 April 2026 the Income-tax Act, 2025 governs instead, and the corresponding provision is section 393(2), Table, Serial No. 17 of that Act. What follows is the 1961 Act text for a payment inside its period, as printed on the Year 2025 departmental page. The duty in sub-section (1) falls on any person responsible for paying a non-resident or a foreign company; it bites on interest and on any other sum chargeable under the Act, excluding salary and excluding interest referred to in sections 194LB, 194LC and 194LD; it is triggered at credit or payment, whichever is earlier, with credit to an interest payable or suspense account deemed by Explanation 1 to be credit to the payee; and the rate is the rate in force. The single proviso defers the trigger to payment alone for interest payable by the Government, a public sector bank within clause (23D) of section 10 or a public financial institution within that clause. Sub-section (2) lets the PAYER apply to the Assessing Officer for a determination of the chargeable proportion of a composite sum; sub-sections (3) and (4) let the RECIPIENT obtain a nil-deduction certificate that binds every payer while it is in force; sub-section (5) is the rule-making power behind it; sub-section (6) requires information on every sum, chargeable or not; sub-section (7) lets the Board notify a class of persons or cases who must go to the Assessing Officer even for a sum not chargeable. What changed, and when, on the departmental footnote apparatus. The last change to the section's own text was the omission of the second proviso, which had excluded dividends referred to in section 115-O, by Act No. 12 of 2020 with effect from 1 April 2020 — that is the date the text stated here took effect, and it governed until the section itself ceased to apply to sums credited or paid on or after 1 April 2026. That proviso had an earlier life: it was first inserted by the Finance Act, 1997 with effect from 1 June 1997, omitted by the Finance Act, 2002 with effect from 1 June 2002, re-inserted by the Finance Act, 2003 with effect from 1 April 2003, and omitted again in 2020. In sub-section (2) and again in sub-section (7), the words “to the Assessing Officer to determine, by general or special order” were substituted by Act No. 23 of 2019 with effect from 1 November 2019 by the present “in such form and manner … to determine in such manner, as may be prescribed” formula. Sub-section (6) was substituted by Act No. 20 of 2015, the Finance Act, 2015, with effect from 1 June 2015, replacing a narrower sub-section inserted by the Finance Act, 2008 with effect from 1 April 2008 which had reached only “the person referred to in sub-section (1)” and “any sum”; the substituted text is what added the words “whether or not chargeable under the provisions of this Act”. Sub-section (7) was inserted by the Finance Act, 2012 with effect from 1 July 2012. The old single Explanation was renumbered as Explanation 1 and Explanation 2 was inserted, both by the Finance Act, 2012 and both with retrospective effect from 1 April 1962. The words “or section 194LD” in sub-section (1) were inserted by the Finance Act, 2013 with effect from 1 June 2013. It arises in TDS Defaults and How Tax Law Is Read matters, on section 195, section 195(1), section 195(2), section 195(3), section 195(6), section 195(7), section 393 (Act of 2025), section 395 (Act of 2025), section 397 (Act of 2025), section 398 (Act of 2025), section 197, section 206AA, section 90, section 9(1), section 40(a)(i), section 201(1), section 201(1A), section 201(1) first proviso, section Rule 37BB, section 115-O, section 194LC of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If you are fairly certain nothing is chargeable, you may determine that yourself and remit without deduction. GE India Technology Centre (Supreme Court, 9 September 2010) is the authority; do not let an officer tell you that an application under section 195(2) was a precondition. Use section 195(2) for its actual purpose — a composite sum that you know is partly chargeable and whose taxable proportion you cannot fix. The application is made by YOU, the payer. Do not confuse that with section 197. The certificate under section 197, like the one under section 195(3) and (4), is applied for by the RECIPIENT, and a section 195(3) certificate binds every payer for as long as it is in force or until the Assessing Officer cancels it. File the rule 37BB information even where you deduct nothing — but file the right part. Sub-rule (2) covers the sum that is NOT chargeable: it requires Part D of Form 15CA and sets no monetary threshold at all. The five lakh rupee line does not apply to it. Where the sum IS chargeable, work through sub-rule (1). Part A of Form 15CA covers a payment or aggregate of payments in the financial year that “does not exceed five lakh rupees”. Above that you have two routes, not one: Part B after a certificate from the Assessing Officer under section 197 or an order under section 195(2) or 195(3), or Part C after a certificate in Form 15CB from an accountant. A 15CB is not the only way over the threshold. Check the specified list in sub-rule (3) of rule 37BB before assuming any information is due. It exempts a long list of remittance purposes outright. Build the treaty position on the record at the time of payment, not at assessment. Section 90(2) applies the Act only to the extent it is more beneficial to the assessee, and the beneficial rate has to be supportable when the money leaves. Get the payee's PAN, or the rule 37BC particulars, before you remit. Section 206AA(1) takes the rate to the higher of the rate in the Act, the rate in force and twenty per cent, and that is where the large section 201 demands in this area are made. If you have already failed to deduct, look at the first proviso to section 201(1) before conceding. The word “resident” there was substituted by “payee” by Act No. 23 of 2019 with effect from 1 September 2019, so from that date the proviso is available for a non-resident payee: you are not an assessee in default if the payee has filed a return, taken the sum into account and paid the tax, and you obtain an accountant's certificate. Interest under section 201(1A) still runs. Note the trigger is credit or payment, whichever is earlier, and that Explanation 1 treats a credit to an interest payable or suspense account as a credit to the payee. A year-end provision can create the liability before any money moves. For a sum credited or paid on or after 1 April 2026, stop using section 195 and work from the Income-tax Act, 2025: section 393(2), Table, Serial No. 17 for the duty, section 395 for a certificate or a determination — and note that from 1 April 2026 section 395(6), inserted by Act No. 4 of 2026, lets the application go instead to a prescribed income-tax authority, which may verify it electronically and either issue the certificate or reject the application, section 397(3)(d) for the information return, and section 398 for the consequences of getting it wrong.
Superseded by amendment. Good law for a sum whose credit or payment, whichever is earlier, fell on or before 31 March 2026, and superseded from 1 April 2026, when the Income-tax Act, 2025 took over: the CBDT's transition FAQ states that where the earlier event falls on or after that date the 2025 Act applies, and the corresponding provision is section 393(2), Table, Serial No. 17. The 1961 Act text here is quoted from the newest consolidation of section 195 available; eighteen vintages of the section have been read and the operative text is word for word identical in the 2025, 2024 and 2023 vintages, which is the best evidence available that nothing displaced it between 1 April 2020 and the repeal. Every amendment date is taken from a footnote and each is corroborated in a second consolidation. Two things are left open. The 2025 and 2024 vintages carry no amendment footnotes at all, so the dates rest on older annotated vintages rather than on the text the current wording is quoted from. And no Finance Act text has been read, so the amending statutes are given by the Act numbers the footnotes use — Act No. 12 of 2020 and Act No. 23 of 2019 — and are deliberately not named as the Finance Act, 2020 and the Finance (No. 2) Act, 2019. One point of construction is settled and should not be conceded. The words 'chargeable under the provisions of this Act' in sub-section (1) are a gateway and cannot be read out of it: a payer who is fairly certain that no part of the sum is chargeable in India may make that determination himself and is not obliged to apply under sub-section (2) first. That is GE India Technology Centre, and it survives the repeal as a construction of identical words wherever they recur. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
ON THE TEXT AND ITS VINTAGE. The statutory wording in this record comes from a consolidation of 2025 vintage, which prints 'Income-tax Act, 1961', section 195 and the marginal note 'Other sums'. That check matters here: unsuffixed consolidations of this section in circulation are of a 2000 vintage and still print the pre-1991 shape and the section 115-O proviso. One of those was not used, and should not be. ON THE AMENDMENT DATES. They come from the footnote apparatus in the older annotated vintages, because the 2024 and 2025 vintages carry none. Explanation 2 rests on a matched pair in the 2014 vintage - 'Explanation renumbered as Explanation 1 by the Finance Act, 2012, w.r.e.f. 1-4-1962' and 'Inserted, by the Finance Act, 2012, w.r.e.f. 1-4-1962'. The section 115-O proviso rests on a footnote in the 2020 vintage, which reproduces the omitted words, and on one in the 2014 vintage, which reads in full: 'Inserted by the Finance Act, 2003, w.e.f. 1-4-2003. Earlier the second proviso was inserted by the Finance Act, 1997, w.e.f. 1-6-1997 and later on omitted by the Finance Act, 2002, w.e.f. 1-6-2002.' Sub-section (6) rests on footnotes in the 2015 and 2016 vintages. ON GE INDIA TECHNOLOGY CENTRE P. LTD v. CIT. It has been read in full: Supreme Court, 9 September 2010, Kapadia CJI and K.S. Radhakrishnan J. Both sentences quoted on this page are the Court's own words from the judgment text and not from a headnote or a digest. The 'obliterating the words' sentence has been confirmed against a second source; the sentence beginning 'The application of Section 195(2) pre-supposes' has been seen in one source only and has not been double-sourced. No law-report citation is given for the case, because the reported reference was seen only in a third-party digest. ON THE OTHER PROVISIONS NAMED. Rule 37BB is quoted from its current text. The successor provisions of the Income-tax Act, 2025 - section 393(2) and its Table Serial No. 17, section 395, section 397(3)(d) and section 398 - were each read in their own current text and not taken from commentary. Section 206AA(1) is quoted from a 2009 vintage which does not carry the non-resident relaxation, so the rule 37BC point is stated only as far as the departmental tutorial on section 206AA goes; sections 40(a)(i) and 90(2) were likewise read in 2009 vintages. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Section 195 governs a sum whose credit or payment, whichever is earlier, falls on or before 31 March 2026. For a sum credited or paid on or after 1 April 2026 the Income-tax Act, 2025 governs instead, and the corresponding provision is section 393(2), Table, Serial No. 17 of that Act. What follows is the 1961 Act text for a payment inside its period, as printed on the Year 2025 departmental page. The duty in sub-section (1) falls on any person responsible for paying a non-resident or a foreign company; it bites on interest and on any other sum chargeable under the Act, excluding salary and excluding interest referred to in sections 194LB, 194LC and 194LD; it is triggered at credit or payment, whichever is earlier, with credit to an interest payable or suspense account deemed by Explanation 1 to be credit to the payee; and the rate is the rate in force. The single proviso defers the trigger to payment alone for interest payable by the Government, a public sector bank within clause (23D) of section 10 or a public financial institution within that clause. Sub-section (2) lets the PAYER apply to the Assessing Officer for a determination of the chargeable proportion of a composite sum; sub-sections (3) and (4) let the RECIPIENT obtain a nil-deduction certificate that binds every payer while it is in force; sub-section (5) is the rule-making power behind it; sub-section (6) requires information on every sum, chargeable or not; sub-section (7) lets the Board notify a class of persons or cases who must go to the Assessing Officer even for a sum not chargeable. What changed, and when, on the departmental footnote apparatus. The last change to the section's own text was the omission of the second proviso, which had excluded dividends referred to in section 115-O, by Act No. 12 of 2020 with effect from 1 April 2020 — that is the date the text stated here took effect, and it governed until the section itself ceased to apply to sums credited or paid on or after 1 April 2026. That proviso had an earlier life: it was first inserted by the Finance Act, 1997 with effect from 1 June 1997, omitted by the Finance Act, 2002 with effect from 1 June 2002, re-inserted by the Finance Act, 2003 with effect from 1 April 2003, and omitted again in 2020. In sub-section (2) and again in sub-section (7), the words “to the Assessing Officer to determine, by general or special order” were substituted by Act No. 23 of 2019 with effect from 1 November 2019 by the present “in such form and manner … to determine in such manner, as may be prescribed” formula. Sub-section (6) was substituted by Act No. 20 of 2015, the Finance Act, 2015, with effect from 1 June 2015, replacing a narrower sub-section inserted by the Finance Act, 2008 with effect from 1 April 2008 which had reached only “the person referred to in sub-section (1)” and “any sum”; the substituted text is what added the words “whether or not chargeable under the provisions of this Act”. Sub-section (7) was inserted by the Finance Act, 2012 with effect from 1 July 2012. The old single Explanation was renumbered as Explanation 1 and Explanation 2 was inserted, both by the Finance Act, 2012 and both with retrospective effect from 1 April 1962. The words “or section 194LD” in sub-section (1) were inserted by the Finance Act, 2013 with effect from 1 June 2013.
TaxSphere, “Statutory position — s.195: tax is deducted only on a sum “chargeable under the provisions of this Act”, and Explanation 2 fixes who owes the duty, not what is taxable”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-195-the-chargeable-sum-gateway-and-explanation-2/ (validity last checked 2026-09-23)
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The TDS officer has passed an order under section 201 treating me as an assessee in default and has added interest under section 201(1A). Who exactly is in default, what gets me out of it, which interest rate runs for which period, and how far back can he go?
I am paying a foreign supplier for equipment and its erection. Most of the payment is cost, not profit. Must I deduct tax at source under section 195 at all?
The officer says I am in default under s.201 for not deducting under s.195 on payments abroad, although I have a Form 15CB from my chartered accountant for every remittance. Is that enough?
My non-resident payee has no PAN. Must I deduct at twenty per cent, and is there any prescribed alternative?
