Clarification Required - Timing of TRC, Form 10F, No PE Declaration and Form 15CA/15CB for TDS on Non-Resident Payments

[Lalitha Krishnamurthy]

We seek clarification regarding the requirement and timing of obtaining tax documents from a foreign vendor while making payment for services and issuing Form 15CA/15CB.

In our understanding, under Section 195 of the Income Tax Act, TDS on payments to non-residents is required to be deducted at the time of credit or payment, whichever is earlier. If the non-resident is eligible for DTAA benefits, a lower TDS rate may be applied upon receipt of the following documents:

Tax Residency Certificate (TRC)

Form 10F

No Permanent Establishment (No PE) Declaration

Our query concerns the stage at which these documents must be obtained - whether at the time of booking the expense (credit), at the time of payment and issuance of Form 15CA/15CB, or both.

Illustration:

A foreign vendor issued an invoice in FY 2023-24. At that time, TRC, Form 10F, and No PE Declaration were provided. Based on these documents, DTAA benefit was applied and TDS was deducted at the concessional rate at the time of booking the expense (credit) in FY 2023-24. The TDS was deposited and the return filed accordingly.

However, actual payment is being made in FY 2025-26. In FY 2025-26, the vendor has not provided updated TRC, Form 10F, or No PE Declaration.

Our specific questions are:

1. Are fresh tax documents required at the time of payment in FY 2025-26, even though TDS was already deducted at the time of credit in FY 2023-24?

2. If updated documents are not provided, is additional TDS required at domestic rates?

3. Does the TDS rate change at the time of payment?

4. Is revision of the earlier TDS return required?

5. Are TRC, Form 10F, and No PE declarations financial year-specific and required separately for each year of payment and Form 15CA/15CB issuance?

We request your detailed clarification on the above to ensure proper compliance and avoid any future tax exposure, interest, or disallowance.

Looking forward to your guidance.

AI Summary

TDS on non-resident payments requires TRC/Form10F/No PE for DTAA benefits; timing and renewal at payment questioned. TDS on non-resident payments is deductible at the earlier of credit or payment, and reduced DTAA rates rely on submission of TRC, Form 10F and a No PE declaration; the document queries whether those documents must be obtained at credit, at payment/Form 15CA/15CB issuance, or both, and whether absence of updated documents at payment affects applicable TDS rate, return revision, or year-specific documentary requirements.