Paying a Non Resident? Complete Guide to TDS Rules 2026

If you are making payment to NRI or foreign company, TDS rules changed from April 2026. Section name updated and compliance process modified. Understanding correct tax rate helps avoid penalty and notices.

1. Section Name Change in 2026

Earlier TDS on payment to non resident was covered under Section 195. Under Income Tax Act 2025, new section is Section 393(2). Wrong section mention may create compliance issue.

Important: Always update section reference while filing TDS return or making payment.

2. TDS Rate Chart for Non Resident

Type of Payment Tax Rate Quick Note
Rent paid to NRI 30% TDS calculated on full rent amount
NRO Interest 30% DTAA benefit may reduce tax
Sale of Property 12.5% Applicable on total sale value
Dividend 20% May reduce as per treaty
Salary Slab Rate Normal income tax slab applicable

3. Example for Better Understanding

Example 1: If you pay rent of ₹50,000 per month to NRI TDS = 30% Monthly TDS = ₹15,000 Amount paid to NRI = ₹35,000
Example 2: Property purchase from NRI for ₹80 lakh TDS rate = 12.5% TDS amount = ₹10 lakh Buyer must deduct tax before payment.

4. DTAA Benefit (How to Reduce Tax)

Double Tax Avoidance Agreement allows lower TDS rate. NRI must provide documents to claim benefit.

  • Tax Residency Certificate
  • Form 10F
  • PAN Card

5. Property Purchase Rule Change 2026

From October 2026, buyer may use PAN instead of TAN for TDS payment. This simplifies compliance process.

  • No need to apply TAN
  • Faster compliance
  • Less paperwork

6. Common Mistakes to Avoid

  • Wrong section reference
  • Late TDS payment
  • Incorrect form selection
  • No PAN available
  • Not checking DTAA benefit

7. FAQ

Q1. NRI ko payment par TDS kab deduct hota hai? Payment credit ya payment date par TDS deduct hota hai, jo pehle ho.

Q2. DTAA benefit kaise milega? Tax Residency Certificate aur Form 10F submit karna hota hai.

Q3. Property purchase from NRI par kitna TDS? Generally 12.5% applicable hota hai.

Q4. TDS late deposit par kya penalty? 1.5% per month interest applicable hota hai.

Q5. PAN na ho toh kya hoga? Higher TDS rate applicable ho sakta hai.

Conclusion

New rules mainly section reference update aur compliance simplification se related hain. Proper documentation maintain karna important hai. Correct TDS deduction helps avoid penalty.