TDS on International Payments from India: What Freelancers Need to Know
TDS on international payments is a source of confusion for Indian freelancers — both those receiving from abroad and those hiring international contractors. Here's how Section 195 works and when it applies.
Section 195: TDS on payments to non-residents
Section 195 of the Income Tax Act requires Indian payers to deduct TDS when making payments to non-resident individuals or companies. Key points:
- When it applies: an Indian company paying a foreign freelancer for services that have a 'source' in India (work performed in India, or work for which the benefit accrues in India).
- TDS rate: 10–20% depending on nature of payment, unless reduced by DTAA.
- As an Indian freelancer receiving from abroad: TDS generally does NOT apply to you — foreign payers don't deduct Indian TDS. You pay advance tax directly.
- As an Indian business hiring foreign contractors: you may need to deduct TDS under Section 195. Get a CA opinion for amounts above ₹1 lakh.
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