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

Amendment to Section 115A reduces TDS on non-resident royalties, but Section 206AA's PAN requirement complicates benefits. A discussion on a forum addressed the tax deduction at source (TDS) on royalty and fees for technical services for non-resident taxpayers. An amendment to Section 115A reduced TDS from 25% to 10% for non-residents without a Permanent Account Number (PAN) in India. However, Section 206AA mandates a 20% TDS if the non-resident lacks a PAN, rendering the amendment less beneficial. A respondent agreed, noting that Indian entities often have to bear the additional TDS cost due to limited negotiating power with foreign service vendors.