Need the rate rather than the route? Use the TDS rate finder for the section-wise rates, and the interest and late-fee calculator if a deduction has already been missed.
Section 195(1) of the Income-tax Act, 1961 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 the Act — other than income chargeable under the head "Salaries" — to deduct income-tax at the rates in force at the time of credit to the payee's account or at the time of payment, whichever is earlier. The operative words are "sum chargeable under the provisions of this Act": the deduction obligation follows chargeability, and chargeability is settled by reading the Act together with the applicable Double Taxation Avoidance Agreement, because Section 90(2) lets the assessee take whichever of the two is more beneficial. Everything else in the process is machinery built on top of that one question.
Section 195(6) then requires the payer to furnish information about the payment "whether or not chargeable" to tax, in the form and manner prescribed. Rule 37BB of the Income-tax Rules, 1962 prescribes Form 15CA and sorts it into four Parts. Part A is for a remittance chargeable to tax where the aggregate of such remittances during the financial year does not exceed ₹5 lakh. Part B is for a chargeable remittance above that aggregate where a certificate or order has been obtained from the Assessing Officer under Section 195(2), Section 195(3) or Section 197. Part C is for a chargeable remittance above that aggregate with no such order — and this is the only route that requires a certificate in Form 15CB from an accountant within the meaning of the Explanation to Section 288(2). Part D is for a remittance that is not chargeable to tax under the Act at all.
Rule 37BB(3) lifts the reporting obligation entirely in two situations: where the remittance is made by an individual and does not require prior Reserve Bank of India approval under Section 5 of FEMA read with Schedule III of the Foreign Exchange Management (Current Account Transactions) Rules, 2000; and where the remittance is of a nature listed in the specified list appended to the rule, which was expanded to 33 entries and covers, among others, advance payment against imports and settlement of import invoices, business and personal travel, education and medical remittances, and remittances by diplomatic missions. This is an exemption from the form, not from the tax — where a sum in the specified list is nonetheless chargeable, the Section 195 deduction obligation continues to apply on its own footing.
An Indian company remits ₹38 lakh in the year to a US software company as a licence fee treated as royalty. It is the first such remittance this year, the payee has no Indian PAN, and no application has been made to the Assessing Officer.
