TDS on Foreign Remittance Above ₹5 Lakh

Crossing ₹5 lakh in aggregate remittance to a foreign payee generally triggers the requirement for a CA certificate (Form 15CB) in addition to Form 15CA — it does not itself change the TDS rate.

FY 2026-27 · Section 393(2)

Quick answer

Indicative rate

Unchanged — the ₹5 lakh threshold affects documentation, not rate

Section & code

Form 15CA, Form 15CB

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.

A commonly misunderstood threshold

The ₹5 lakh figure is frequently misunderstood as a TDS-rate threshold — as though payments below it are taxed differently from payments above it. That's incorrect: the ₹5 lakh threshold determines whether a chartered accountant's certificate (Form 15CB) is required in addition to the payer's own declaration (Form 15CA). It does not change the underlying TDS rate, which continues to depend entirely on the nature and classification of the payment under Section 393(2) and any applicable DTAA.

Aggregate, not per-transaction

The ₹5 lakh threshold is assessed on the aggregate of remittances to a specific payee during the financial year, not on each individual transaction. A business making four separate ₹1.5 lakh payments to the same foreign vendor over the year has crossed the aggregate threshold on the fourth payment (total ₹6 lakh), even though no single transaction individually exceeded ₹5 lakh — this aggregation rule is a frequent source of inadvertent non-compliance when payments are tracked transaction-by-transaction rather than payee-by-payee.

What happens below the threshold

For remittances below the aggregate ₹5 lakh threshold that are still chargeable to tax, Form 15CA is typically still required (in a simplified format), but Form 15CB's CA certification generally isn't mandatory — though many businesses obtain one anyway for higher-risk or first-time cross-border transactions, since the certificate provides a documented, professionally-reviewed classification that protects the business even where not strictly compulsory.

Tracking aggregate payments across a financial year

Because the threshold aggregates by payee across the year, businesses making recurring payments to the same foreign vendor — a SaaS subscription, an ongoing consultancy retainer, a recurring royalty — should track cumulative payments to that specific payee from the start of the financial year, not just evaluate each payment in isolation. A practice management or compliance tracking system that flags when a payee's running total is approaching ₹5 lakh avoids a late scramble for a CA certificate on a payment that's already due.

Worked example

Quarterly SaaS payments crossing the threshold mid-year

An Indian company pays a foreign SaaS vendor ₹1,80,000 each quarter for a subscription treated as taxable FTS (not the NIL software-licence category). By the end of Q3, the aggregate reaches ₹5,40,000 — crossing the ₹5 lakh threshold. The Q3 payment (and all subsequent payments to this vendor for the rest of the year) now requires Form 15CB in addition to Form 15CA, even though each individual quarterly payment is well below ₹5 lakh on its own.

Common mistakes & litigation traps

Assessing the threshold per transaction instead of per payee, per year

Multiple smaller payments to the same foreign payee can cumulatively cross ₹5 lakh even if no single payment does — track the running annual total, not isolated transactions.

Believing the threshold changes the TDS rate

₹5 lakh is a documentation trigger (whether Form 15CB is needed), not a rate threshold — the applicable TDS rate depends entirely on the nature of the payment, unaffected by this figure.

Not flagging approaching thresholds for recurring payees

Recurring payment relationships (subscriptions, retainers, royalties) benefit from proactive tracking so a CA certificate can be arranged before the triggering payment, not after it's already overdue.