TDS on Foreign Consultancy Fees

Most foreign consultancy fees qualify as Fees for Technical Services (FTS) at 20% domestic rate, but pure advisory-without-technical-content payments can fall outside FTS entirely.

FY 2026-27 · Section 393(2)

Quick answer

Indicative rate

20% (if classified as FTS)

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.

What actually makes a consultancy fee 'FTS'

Fees for Technical Services generally covers payments for managerial, technical, or consultancy services. In practice, most cross-border consultancy engagements — strategy advice, market entry consultancy, technical process advice, engineering consultancy — fall squarely within this definition and attract the 20% domestic Section 393(2) rate, absent a lower DTAA rate.

The classification becomes genuinely contestable at the margins: is a payment for pure information-sharing (which some treaties treat differently from 'services') actually FTS, or does it fall into a different category? Most day-to-day consultancy engagements don't sit at this margin, but high-value or unusual engagements are worth a closer look before defaulting to the standard FTS treatment.

The 'make available' condition in some treaties

A meaningful number of India's DTAAs (notably with the US, UK, Singapore, and several others) include a 'make available' clause in their FTS/technical-services article — meaning the service must transfer technical knowledge, skill, or know-how that the recipient can subsequently apply independently, not just deliver a one-time output. Under treaties with this clause, a consultant who delivers a report or advice without teaching the underlying methodology may fall outside the treaty's FTS definition entirely, even though the payment would still be FTS under the domestic Act.

This creates a genuine planning consideration: where the treaty has a 'make available' clause and the engagement is a one-off deliverable rather than capability transfer, there's a reasonable argument for treaty-based non-taxability — but this needs careful, fact-specific analysis, not a blanket assumption.

Distinguishing consultancy from pure business income

Not every payment to a foreign consultant is FTS. A payment for the sale of a completed product or standardized deliverable, with no ongoing advisory or technical element, can sometimes be characterised as ordinary business income of the foreign party rather than FTS — taxable in India only if the foreign party has a business connection or PE here. The distinction hinges on whether the engagement's substance is genuinely advisory/technical in character or is closer to a product sale.

Practical steps for classifying a consultancy engagement

Read the actual scope of work in the engagement letter or contract, not just the invoice description.
Check whether the relevant DTAA (if any) has a 'make available' clause for its technical-services article.
Assess whether the deliverable transfers knowledge/methodology or is a one-off output with no lasting capability transfer.
Document the classification rationale before applying a rate, especially for high-value engagements.

Worked example

A ₹12 lakh strategy consultancy fee paid to a US-based advisor, with a 'make available' treaty clause

An Indian company engages a US strategy consultant for ₹12,00,000 to deliver a market-entry report, with no ongoing training or methodology transfer to the client's team. Under the domestic Act, this is FTS at 20%. However, the India-US DTAA's FTS article includes a 'make available' condition, and since the consultant didn't transfer any lasting technical capability to the client, there's a reasonable treaty-based argument that the payment falls outside the treaty's FTS definition — this would need to be assessed carefully, with the TRC, Form 10F, and a considered position on file, before applying any reduced or NIL treatment.

Common mistakes & litigation traps

Assuming all US/UK/Singapore consultancy fees automatically qualify for a 'make available' exemption

The exemption depends on whether the specific engagement actually transferred capability — a one-off report can go either way depending on its content, not the country of the treaty alone.

Classifying a product-sale-like deliverable as FTS by default

Not every foreign deliverable is a 'service' in the FTS sense — some are closer to a completed product sale, changing the applicable analysis entirely.

Missing the domestic-rate default when treaty documentation isn't furnished in time

Without a valid TRC and Form 10F on file before the remittance, the 20% domestic rate applies regardless of how strong the treaty argument might otherwise be.