TDS on Fees for Technical Services Paid to an NRI

FTS paid to an individual NRI attracts the same 20% domestic Section 393(2) rate as payments to a foreign company, with individual (not corporate) surcharge slabs applying on top.

FY 2026-27 · Section 393(2)

Quick answer

Indicative rate

20%

Section & code

Section 393(2), Sl. No. 17, Code 1057

Forms typically needed:

Form 15CA Form 15CB

Cross-Border TDS Decision Helper

Nature of payment

Payee has valid PAN?

TRC + Form 41 furnished?

Indicative Act rate

20%

Domestic Act rate under Section 393(2) for royalty/FTS to a non-resident non-company — doubled from 10% by Finance Act 2023 (effective 1 April 2023), unchanged since. Classify carefully: royalty and FTS have different treaty definitions.

Without a TRC and Form 41, the treaty rate can't be applied — the Act rate above governs until documentation is furnished.

This is a decision aid, not a filing determination — always confirm classification and the exact treaty article with a professional before remitting.

FTS to an individual NRI vs. a foreign company

The base domestic rate for FTS — 20% — applies whether the payee is an NRI individual or a foreign company, but the surcharge structure layered on top differs by payee type, since individual and corporate surcharge slabs are set separately and generally follow the payee's total taxable income in India for that year.

A common scenario is an Indian company engaging an NRI professional — a technical consultant, an engineer, a former-resident specialist now based abroad — for a specific project or ongoing advisory work. The India connection (often prior employment or personal ties) doesn't change the TDS analysis; classification and rate follow the same Section 393(2) framework as for any other non-resident.

The 'returning NRI' complication

A frequent practical wrinkle: an NRI professional who splits time between India and abroad, or who returns to India partway through the engagement, may shift residential status during the year. TDS deducted under Section 393(2) assumes non-resident status at the time of payment — if residential status later changes for the full financial year (based on the days-in-India test), this can affect the payee's own tax filing position, though it doesn't retroactively change whether TDS was correctly withheld at the time of each payment.

DTAA claims are common but documentation is often missed

Because many NRI professionals maintain closer, more informal relationships with Indian payers than an institutional foreign company would, TRC and Form 10F documentation is more frequently overlooked in practice — an Indian company paying a former colleague now living in the US, for instance, may simply not think to request formal treaty documentation the way it would with an unfamiliar foreign vendor. This oversight means the payer defaults to the 20% domestic rate even where a lower treaty rate would have applied, simply for lack of paperwork.

Getting the classification and forms right

Confirm the NRI's residential status for the relevant financial year before assuming Section 393(2) applies — a resident individual isn't subject to this framework at all.
Request TRC and Form 10F upfront, as part of onboarding the engagement, rather than after the first payment is already processed.
File Form 15CA for the remittance, and Form 15CB if the aggregate crosses the ₹5 lakh threshold or a treaty benefit is claimed.

Worked example

A ₹7 lakh technical consultancy fee paid to an NRI engineer based in Germany

An Indian manufacturing firm pays ₹7,00,000 to a German-resident NRI engineer for technical process consultancy delivered remotely. This is FTS. Without DTAA documentation, 20% TDS (₹1,40,000) applies, with Form 15CA and Form 15CB (since the amount exceeds ₹5 lakh) required. If the engineer furnishes a valid German TRC and Form 10F, the India-Germany DTAA's technical-services article may provide a lower rate — but this must be checked and documented before the remittance, not assumed.

Common mistakes & litigation traps

Assuming a familiar NRI payee doesn't need formal documentation

Personal familiarity with the payee doesn't substitute for a valid TRC and Form 10F — without the paperwork, the domestic 20% rate applies regardless of the relationship.

Missing a mid-year residential status change

An NRI who returns to India and crosses the residency threshold during the year changes their own filing position — confirm status doesn't quietly shift the applicable framework mid-engagement.

Treating NRI FTS payments as exempt from the 20% rate because the payee is an individual

The individual-vs-company distinction doesn't create a lower base rate for FTS — 20% applies to both, with only surcharge slabs differing.