TDS on Payments to Non-Residents: Section 393(2), Treaty Relief and the Form 145 Remittance File

Quick answer

Money leaving India for a non-resident is deducted under section 393(2) of the Income-tax Act, 2025, at credit or payment, whichever is earlier. Most commercial remittances land on Table serial number 17, the residual row that replaced section 195. Treaty relief needs a residence certificate plus Form No. 41. The bank file is Form No. 145, with an accountant's certificate in Form No. 146 above ₹5,00,000.

Who this page is for

You are sending money out of India — a licence fee to a software vendor, a management charge to a parent, rent to an NRI landlord, consideration to a non-resident seller of a flat — and the bank will not release it without paperwork. This page is the complement to our section 393 crosswalk, which declined to tabulate section 393(2) because seventeen rows interacting with treaty relief are not something a general crosswalk should compress. This is where that table lives.

Which Act governs your remittance

One test, and it is the familiar one. Section 393(2)(b) requires deduction at the time of credit or payment, whichever is earlier — not the invoice date.

• Earlier of credit or payment on or after 1 April 2026 — Income-tax Act, 2025 and the Income-tax Rules, 2026.
• Earlier of credit or payment up to 31 March 2026 — Income-tax Act, 1961 and the Income-tax Rules, 1962.

Then the boundary that trips up more finance teams than any other. The Income-tax Act, 2025 came into force on 1 April 2026 under section 1(3) — section 1(2) is only the extent clause. So it governs tax year 2026-27, meaning financial year 2026-27.

Assessment year 2026-27 is financial year 2025-26, and it is still governed by the Income-tax Act, 1961, including for proceedings begun after 1 April 2026: section 536(2)(c) continues the repealed Act for any proceeding in respect of a tax year beginning before that date. The Finance Act, 2026 proves the split in one enactment, with two charging sections and two rate schedules, one per Act.

Section 393(2) in full

Section 393(2) applies where income or a sum of a nature in the second column is credited or paid by the payer in the fourth column to a non-resident in the third column, at the rate in the fifth column and subject to sub-sections (4), (8) and (9).

The three Notes that change how the table reads

Note 1, for serial numbers 2, 3 and 4: the interest payable is income only to the extent it does not exceed interest at the rate approved by the Central Government, having regard to the terms of the loan or bond and its repayment.

Note 2, for serial numbers 10 and 15: deduct at 20%; or, where an agreement under section 159(1) or 159(2) applies to the payee and the payee has furnished a certificate referred to in section 159(8), at the rate provided in that agreement if lower than 20%. The treaty rate is available only with the certificate, not on assertion.

Note 3, for serial number 17, has two limbs. Under (a), where interest is payable by the Government, a public sector bank or a public financial institution within Schedule VII, Note 3, deduction is made only at the time of payment, not on credit. Under (b), the obligation to deduct:

extend[s] to all persons resident or non-resident, whether or not, the non-resident person has — (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India.

That is the extraterritorial reach carried forward from the Explanation to section 195(1) of the 1961 Act. "They have no office here" is not an answer to the obligation.

Serial number 17 is the row you will actually use

Sixteen rows are for a defined instrument, payee or payer. Serial number 17 is the residual, and it is the successor to section 195 of the 1961 Act: any interest other than the concessional rows, or any other sum chargeable under the Act that is not salary, paid by any person to a non-resident who is not a company or to a foreign company. A service fee, a royalty, a technical fee, a management charge to a parent, rent to an NRI landlord, consideration for a capital asset — if it is chargeable and not salary, it lands here.

Two boundaries, because blurring them puts the wrong section on a statement. Salary to a non-resident employee is section 392, not section 393(2) — the row excludes income chargeable under "Salaries". And section 393(2) is not the whole of section 393: sub-section (1) is payments to a resident, (3) payments to any person, (4) the cases where no deduction is made.

Where this page stops: "rates in force"

Serial numbers 7, 8, 9 and 17 give you no number. They say rates in force, which for a non-resident payee turns on Part II of the First Schedule to the Finance Act, 2026 read with section 159 — and carries surcharge and cess in a way a resident TDS rate does not.

We publish no non-resident "rates in force" figure, and no surcharge or cess loading. Neither was verifiable from the primary text we captured, and a wrong rate here is not cosmetic: under-deduct and you are an assessee in default with the whole expenditure at risk of disallowance; over-deduct and you must recover the money from the Government. This is the point to take advice.

Treaty relief under section 159

Section 159 is the successor to sections 90 and 90A of the 1961 Act. Five sub-sections do the work.

• 159(4) — where the Central Government has entered into an agreement under 159(1), or a specified association under 159(2), the Act applies to that assessee to the extent it is more beneficial.
• 159(5) — charging a foreign company at a rate higher than a domestic company is not to be regarded as less favourable.
• 159(6) — irrespective of the more-beneficial rule, Chapter XI applies even if it is not beneficial to the assessee. Anti-avoidance is not switched off by a treaty claim.
• 159(7) — the interpretation ladder for a term used in an agreement: the agreement's own definition, then the Act's, then a notification, then another Central law.
• 159(8) — the precondition. A non-resident may claim relief under an agreement only when a certificate of residence is obtained from the Government of that country or specified territory, and such other documents and information as may be prescribed are provided.

Rule 75 of the Income-tax Rules, 2026 prescribes those other documents and information as Form No. 41 — the successor to Form 10F. So a treaty claim needs two things in your file before you deduct: the residence certificate from the payee's own Government, and Form No. 41. Where there is no agreement, section 160 gives unilateral relief at the lower of the Indian or foreign rate — in the payee's assessment, not as a deduction rate for you.

We state no treaty rate for any country. They live in the individual notified agreements, differ by country and by article, and none was captured here.

When the payee has no PAN: Rule 217

The general rule for a missing PAN is section 397(2)(b)(i) — the higher of the rate in the provision, the rates in force, or 20% in a case like this. Rule 217, made under section 397(2)(c), switches that off for non-residents, but only within a closed list: a non-resident not being a company, or a foreign company, for payments in the nature of interest, royalty, fees for technical services, dividend, and payments on transfer of any capital asset — and only if the deductee furnishes:

Rule 217(3) adds a second route: section 397(2)(b)(i) also does not apply where the non-resident is not required to apply for a PAN under section 262 and the rules made under it.

Say the limit out loud, because it is more often assumed than checked. A payment outside that closed list falls back to section 397(2)(b)(i). Rent is not interest, royalty, fees for technical services, a dividend or a capital-asset transfer, so an NRI landlord with no PAN gets no Rule 217 relief at all.

The remittance file your bank wants: Rule 220

Rule 220, the successor to the 15CA and 15CB routine, applies to a person responsible for paying a non-resident not being a company, or a foreign company, any sum chargeable under the Act. It sorts the world by a single ₹5,00,000 threshold.

Reading Form No. 145 as the replacement for Form 15CA, and Form No. 146 for Form 15CB is our derivation from what each does — orientation, not an official concordance. The threshold is measured on the payment or the aggregate of payments in the tax year, so a monthly remittance under ₹5,00,000 still crosses it partway through. For the Part B route, a lower or nil deduction certificate under section 395(1) is applied for in Form No. 128 under Rule 213.

The three cases where nothing is filed at all

Rule 220(3) requires no information for a sum not chargeable under the Act where:

1. The remittance is made by an individual and does not require prior RBI approval under section 5 of FEMA, 1999 read with Schedule III to the Foreign Exchange (Current Account Transaction) Rules, 2000.
2. The remittance is by a Unit of an International Financial Services Centre referred to in section 147(1)(b).
3. The remittance is of a nature in the specified list of RBI purpose codes in the rule.

The third is the one people quote at each other, so here is the honest version. The list runs to dozens of codes; what follows is a representative subset, not the complete list, and an absence from these lines is no proof a code sits outside the exemption:

• S0001–S0005 and S0011 — Indian investment abroad and loans to non-residents
• S0101–S0104 and S0190 — imports and advance payment against imports
• S0202, S0208, S0212 — operating expenses and passages of Indian shipping and airlines abroad
• S0301–S0305 — business travel, basic travel quota, pilgrimage, medical treatment, education
• S0401 postal services, and S0501 construction of projects abroad

All three are available only where the sum is not chargeable — none is a way out of reporting a chargeable remittance.

Reporting after you deduct

Form No. 144 covers sections 392(7), 393(2) and 393(3) where the deductee is a non-resident not being a company, a foreign company, or a resident but not ordinarily resident; a deductor's refund claim under Chapter XIX-B is Form No. 139 (Rule 219(6)). To anchor these: Form No. 144 sits where 27Q sat, and Form No. 131 where 16A sat — our derivation from each rule's section coverage, orientation only. Certificates under Rule 215 are generated from the portal specified by the Director General of Income-tax (Systems), not typed by you.

Worked examples

1. A software licence fee to a foreign vendor

Assumptions: an Indian company pays about ₹50,00,000 to a foreign company for an annual software licence; the sum is chargeable under the Act; credit and payment both fall in June 2026; the vendor has furnished a residence certificate and Form No. 41; no section 395 certificate has been obtained.

• Row. Section 393(2), Table serial number 17 — "any other sum chargeable under this Act", not salary, paid by any person to a foreign company.
• Rate. "Rates in force", read with the treaty under section 159(4) if it is more beneficial. This page does not give you that number.
• Treaty file. Section 159(8) is satisfied only because both the residence certificate and Form No. 41 are on file before you deduct.
• Remittance file. Above ₹5,00,000 with no section 395 certificate: the accountant's certificate in Form No. 146 plus Part C of Form No. 145.
• After. Deposit within 7 days from the end of June 2026, report in Form No. 144 for the quarter ended 30 September 2026 (due 31 October 2026), then issue Form No. 131 within 15 days.

2. Interest on an approved foreign-currency borrowing

Assumptions: an Indian company pays ₹40,00,000 of interest in September 2026 to a foreign company on money borrowed in foreign currency from a source outside India, under a loan agreement approved by the Central Government and entered into in 2015; the interest is within the approved rate.

• Row. Section 393(2), Table serial number 2 — the approved foreign-currency borrowing row, at 5%.
• Arithmetic. 5% of ₹40,00,000 is ₹2,00,000, before any surcharge or cess. Whether and how those load onto it is not stated on this page.
• Note 1 check. The row reaches interest only up to the approved rate; anything above sits outside serial number 2.
• No PAN. Interest is inside the Rule 217 closed list, so the four items above are what you collect.
• After. Deposit within 7 days from the end of September 2026, then Form No. 144 and Form No. 131.

3. Buying a flat from a non-resident seller

Assumptions: a resident individual buys a flat for ₹1,20,00,000 from a non-resident seller; the buyer has no TAN and no business income; completion is set for either September or November 2026.

• Row. Section 393(2), Table serial number 17 — consideration for the transfer of a capital asset is a sum chargeable under the Act. Section 393(1) serial number 3(i), the familiar 1% property row, is the resident seller row.
• Why the date matters. Section 87 of the Finance Act, 2026 substitutes section 397(1)(c) from 1 October 2026, adding a resident individual or HUF deducting under serial number 17 on immovable property bought from a non-resident to the persons who need no TAN. Complete in September 2026 and the TAN requirement stands; in November 2026 it does not.
• Rule 217. "Payments on transfer of any capital asset" is inside the closed list, so a seller without a PAN can still preserve the ordinary rate by furnishing the four items.
• What we cannot tell you. How that TAN-exempt deduction is reported from 1 October 2026 is unresolved: Rule 218(3) and Rule 219(5), which prescribe Form No. 141, list only section 393(1) rows. We name no form for this case.

What it costs when this goes wrong

That last row is why cross-border deduction is no place to be approximately right.

Common mistakes

• Using a section 393(1) row because the rate looks right. Sub-section (1) is payments to a resident; a non-resident payee is sub-section (2), and belongs in Form No. 144, not the resident statement.
• Assuming no Indian presence means no obligation. Note 3(b) to serial number 17 says the opposite, in terms.
• Applying a treaty rate on the strength of an invoice footer. Section 159(8) needs the residence certificate and Form No. 41.
• Assuming Rule 217 covers every payment to a non-resident, or reading the ₹5,00,000 Rule 220 threshold per payment. One is a closed list of five payment types; the other is the payment or the aggregate for the tax year.
• Treating assessment year 2026-27 as a new-Act year. It is FY 2025-26 and stays on the Income-tax Act, 1961.

What this page does not claim

Four things are absent on purpose, each because we could not verify it from the primary text captured.

1. Any non-resident "rates in force" figure. It turns on Part II of the First Schedule to the Finance Act, 2026 read with section 159.
2. Any surcharge or cess loading on a non-resident deduction. Both apply to non-resident rates in a way they do not to resident TDS.
3. Any treaty rate for any country. No agreement was captured.
4. The reporting form for a post-1-October-2026 TAN-exempt purchase of immovable property from a non-resident. The substituted section 397(1)(c) removes the TAN requirement, but the challan-cum-statement rules cover only section 393(1) rows. Unresolved; we will update this page when a notification settles it.

If you need any of the four, that is a conversation about your counterparty and agreement, not a number to copy off a page. We can help with the knowable parts — foreign remittance certification, quarterly TDS statements and TAN registration. Our TDS return filing guide covers the quarterly mechanics, and the older 15CA and 15CB guide describes the pre-2026 routine that Forms No. 145 and 146 have replaced.

Sources and currency

Applies to: Payments to a non-resident or a foreign company where the earlier of credit or payment falls on or after 1 April 2026 — tax year 2026-27 onward, governed by the Income-tax Act, 2025 and the Income-tax Rules, 2026. For an earlier credit or payment the Income-tax Act, 1961 and the Income-tax Rules, 1962 still govern.

Every section, rule, form number, table row and quotation on this page was read from the Gazette of India text of the Income-tax Act, 2025 and of the Income-tax Rules, 2026 (G.S.R. 198(E) dated 20 March 2026), on 20 August 2026. Old form labels such as 27Q, 16A, 15CA, 15CB and 10F appear only as reader orientation and are MyFinancialAdvisory's derivation from the function of each new form — the Central Board of Direct Taxes has not published a concordance. Three things are deliberately absent and are listed in full on the page: the meaning of "rates in force" for a non-resident payee, the surcharge and cess loading on a non-resident deduction, and any treaty rate for any country. None of those was verifiable from the primary text captured, so none is stated. Confirm the current position before relying on any figure for a remittance.

• Income-tax Act, 2025 (No. 30 of 2025) — Gazette of India Extraordinary, 21 August 2025 (s.1(3) commencement, s.159 agreements with foreign countries, s.393(2) and its Notes, s.395, s.397, s.398, s.536 repeal and savings)
• Income-tax Rules, 2026 — G.S.R. 198(E) dated 20 March 2026, Gazette of India Extraordinary Part II section 3 sub-section (i), made under s.533 (Rule 75 Form No. 41, Rule 213, Rule 215, Rule 217, Rule 218, Rule 219, Rule 220 and Forms No. 145 and 146)
• Finance Act, 2026 (No. 4 of 2026) — Gazette of India Extraordinary, 30 March 2026 (s.87 substituting s.397(1)(c) with effect from 1 October 2026; two separate charging sections, one per Act)