Understanding Section 195 of the Income Tax Act: A Guide to TDS for Non-Residents

Learn about Section 195 of the Income Tax Act and its importance in TDS deductions for payments to non-residents.

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Section 195 of the Income Tax Act mandates that any person responsible for paying to a non-resident must deduct tax at source before making certain payments, which include interest, royalty, fees for technical services, and other sums. This is vital for ensuring compliance with tax regulations when dealing with international transactions.

FAQs & Answers

  1. What types of payments are covered under Section 195? Section 195 covers various payments made to non-residents, including interest, royalties, fees for technical services, and other sums.
  2. Why is Section 195 important for international transactions? Section 195 is crucial for international transactions as it ensures that tax at source is deducted before payments are made to non-residents, promoting compliance with tax regulations.
  3. Who is responsible for deducting tax under Section 195? Any person or entity responsible for making payments to a non-resident is required to deduct tax at source as per Section 195 of the Income Tax Act.
  4. What is the penalty for not complying with Section 195? Failure to comply with Section 195 can result in penalties for the payer, including potential fines and interest on the unpaid tax amount.

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