TDS on Professional Fees Paid to an NRI

Professional fees paid to an NRI follow the non-resident Section 393(2) framework, not the resident professional-services code (1027) — a distinction frequently missed.

FY 2026-27 · Section 393(2)

Quick answer

Indicative rate

20% (as FTS) or per specific category

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.

The mistake this page exists to prevent

A common, genuinely costly error: applying the resident professional-services rate (10% under Code 1027, formerly Section 194J(b)) to a payment made to an NRI professional. Code 1027 applies specifically to resident payees — the moment the payee is a non-resident, the entire framework shifts to Section 393(2), with a different rate (typically 20% as FTS, not 10%), different documentation requirements, and no threshold instead of the ₹50,000 threshold that applies under Code 1027.

This mistake tends to happen precisely because a professional fee for legal, medical, or accountancy services looks identical on paper to a domestic professional-fee invoice — the trigger for the different treatment is purely the payee's residential status, which isn't always obvious from the invoice alone if the professional has an Indian-sounding name or an Indian bank account.

Why professional fees to NRIs are usually FTS, not a separate category

Unlike the resident framework, which has a dedicated professional-services code, Section 393(2) doesn't have an equivalent standalone 'professional fees' category — a payment for legal, medical, architectural, or accountancy services rendered by an NRI is generally classified as Fees for Technical Services under the general non-resident framework, attracting the 20% domestic rate rather than a specific professional-services rate.

Confirming residential status before applying any rate

Before determining the applicable code and rate, confirm the professional's residential status for the relevant financial year — an Indian citizen living abroad, a foreign national providing services from outside India, and a person who's spent enough days in India to qualify as resident despite holding a foreign address are all different fact patterns with different tax treatment. A foreign bank account or overseas address is a strong indicator but not conclusive proof of non-resident status on its own.

Practical checklist before processing the payment

Confirm the professional's residential status for the current financial year, not just their citizenship or address.
If non-resident, apply Section 393(2)/FTS classification, not the resident Code 1027 rate.
Request TRC and Form 10F if a DTAA benefit will be claimed.
File Form 15CA, and Form 15CB if the ₹5 lakh aggregate threshold is crossed.

Worked example

A ₹3 lakh legal consultation fee paid to an Indian-origin lawyer now resident in Canada

An Indian company pays ₹3,00,000 to a lawyer of Indian origin, now a Canadian tax resident, for legal advisory work. Despite the Indian-sounding name and prior India connection, the lawyer is non-resident for the relevant year. This is FTS under Section 393(2), not Code 1027 — 20% TDS (₹60,000) applies domestically, absent DTAA documentation, with Form 15CA required (Form 15CB not mandatory below the ₹5 lakh aggregate threshold, though best practice is to obtain one for any cross-border payment with genuine classification complexity).

Common mistakes & litigation traps

Applying the resident 10% rate to a non-resident professional

The single most common error in this category — always confirm residential status before assuming the domestic resident professional-fee rate applies.

Assuming an Indian name or Indian bank account means resident status

Neither is conclusive — residential status depends on the actual days-in-India test for the relevant financial year, not identity markers.

Missing the no-threshold rule for non-resident payments

Unlike Code 1027's ₹50,000 threshold, Section 393(2) has no threshold — even a small professional fee to a genuinely non-resident payee triggers the TDS analysis.