TDS on Royalty

[Guest]

As per amendment made in section 115A now in the case of non- resident taxpayer, where the total income includes any income by way of royalty and fees for technical services (FTS) received by such non- resident from govt. or any Indian company will deduct 10 % TDS instead of 25 %.

Sir my question :- Since non- resident don’t have PAN of Indian then section 206AA will be applicable so 20% TDS will be deduct. So as per my understanding, in any case 20% TDS will be deduct that means this provision is not so beneficial for NR.

[RAMA KRISHNA KNVS]

YOU ARE ABSOLUTELY CORRECT. Ultimately indian entities has to gross up the TDS part and pay the foreign service vendor due to low negotiating power.

AI Summary

TDS on royalty and FTS: PAN absence can trigger higher withholding, negating reduced non-resident rate benefit. The amendment reduced the statutory withholding rate for royalty and fees for technical services payable to non-residents by government or Indian companies, but the PAN-related withholding rule requires higher TDS when a payee lacks an Indian PAN; in consequence payers may deduct at that higher PAN-linked rate and gross up amounts, nullifying the intended benefit of the reduced non-resident withholding rate.