I am remitting money abroad to a foreign supplier. Must I deduct tax, and what do I file before the bank will send it?
You deduct under section 195 only if the sum is chargeable to tax in India — that is what the Supreme Court held in GE India Technology Centre. Before the remittance you file the online information form (Form 15CA, now Form No. 145), supported where required by an accountant's certificate (Form 15CB, now Form No. 146), and you may instead apply to the Assessing Officer under section 195(2) to fix the taxable portion.
Section 195(1) requires any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum "chargeable under the provisions of this Act", to deduct income-tax thereon at the rates in force at the time of credit or payment, whichever is earlier. The Explanation extends it to credits to an "interest payable account" or "suspense account" or any other account by whatever name called. Unlike the resident sections there is no monetary threshold and no minimum — the trigger is chargeability, not size.
Chargeability is the whole battleground. In GE India Technology Centre P. Ltd. v. CIT the Supreme Court held that the obligation under section 195(1) arises only if the sum is chargeable to tax in the hands of the non-resident recipient, that the words "chargeable under the provisions of the Act" mean chargeable under sections 4, 5 and 9, and that where the payment contains no element of income the payer cannot be made liable or treated as an assessee in default. The Court explained Transmission Corporation of AP Ltd. as having dealt with a composite payment containing an element of income, and corrected the contrary reading of the Karnataka High Court in CIT v. Samsung Electronics.
That decision also settles what section 195(2) is for. It is a mechanism for the payer who accepts that some part of the remittance bears tax but is unsure how much, to apply to the Assessing Officer to determine the appropriate proportion. It is a safeguard, not a mandatory pre-condition; a payer who genuinely takes the view that nothing is chargeable is not obliged to apply. Sub-sections (3) to (5) provide the corresponding route for the recipient to obtain a certificate for receipt without deduction.
The procedural gate is the remittance form. Under the Income-tax Rules, 2026 (rule 220, which replaced rule 37BB), every person responsible for paying to a non-resident or a foreign company files Form No. 145 — the successor to Form 15CA — before the remittance is made. Part A is for a chargeable remittance not exceeding Rs. 5 lakh in the financial year; Part B where the remittance exceeds Rs. 5 lakh and an Assessing Officer's certificate under section 395(1) has been obtained; Part C where it exceeds Rs. 5 lakh and an accountant's certificate in Form No. 146 (the successor to Form 15CB) is furnished; Part D where the remittance is not chargeable to tax. The accountant's certificate is required only for Part C. No form is required for an individual's remittance under the Liberalised Remittance Scheme, for remittances by an IFSC unit, or for payments falling in the RBI-specified purpose codes.
The consequences of getting it wrong are heavier than on the resident side. Section 40(a)(i) disallows the entire sum, not 30%. There is no first-proviso escape through the payee's return, because that proviso is confined to resident payees. The Pune Tribunal in Atlas Copco (India) Limited v. DCIT held that the limitation in section 201(3) and (4) for passing orders does not apply to payments to non-residents, so old years stay open. On the rate side, the Hyderabad Special Bench in Nagarjuna Fertilizers and Chemicals Limited v. ACIT held that section 206AA does not override the Act and that treaty provisions prevail where more beneficial, so a payee without PAN is not automatically at 20%.
From 1 April 2026 payments to non-residents sit in section 393(2) of the Income-tax Act, 2025, with lower or nil deduction certificates issued under section 395.
Section 195 has no threshold, no small-payment relief and no cure through the payee's return, and it is enforced at the bank counter — the remittance simply does not go out without the form. A wrong call disallows the entire expense under section 40(a)(i) and, on Atlas Copco, can be reopened long after resident-side defaults have become time-barred.
I hold a Mauritius TRC. Can the department still deny me treaty relief on the capital gains?
My protocol has an MFN clause and I applied the lower rate India later agreed with an OECD member. Was I entitled to?
A foreign professional worked on our matter in India but we neither briefed him nor paid him. Can we be treated as his agent and made liable for his tax?
The Tribunal recalled its whole order on my miscellaneous application. Will that recall survive?
My advertising agency bills the advertiser, remits the money to me, and I pay it fifteen per cent back as its margin. The agreement calls it commission. Is that section 194H?
My client is the Indian agent of a foreign cruise ship that sails round trips out of Mumbai. The Assessing Officer says a cruise is entertainment and hospitality, not carriage of passengers, so s.44B does not apply and he wants the s.195 withholding worked out on 25% of the fare instead of 7.5%. Can he do that?
My Indian payer did not deduct tax at source and paid me gross. The Assessing Officer says I should have paid advance tax and has charged s.234B interest. Which years can he do that for?
My Indian contract says my pay is free of Indian tax and the Indian company pays the tax for me. Is that tax itself taxable in my hands?
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