Section 40(a)(i) - Non-compliance of provisions of TDS where payment is made to Non-Resident

TDS non-compliance on non-resident payments triggers disallowance unless recipient files return and pays tax.

Non-deduction or late deduction of tax at source on payments to non-residents for taxable items (interest, royalties, fees for technical services, etc.) results in disallowance of the portion chargeable to tax where TDS was required but not deducted or not paid by the due date. The disallowance is avoided if the recipient files a return, includes the sum in income, pays the tax due, and the deductor obtains a chartered accountant's certificate in the prescribed form confirming those conditions, in which case the deductor is deemed to have deducted and paid tax on the date of the recipient's return.