Welcome to our comprehensive guide that sheds light on the TDS rate chart for the financial year 2024. As we enter the fiscal year 2024, understanding the intricacies of Tax Deducted at Source (TDS) becomes paramount.

Unravelling the complexities of <a href="https://www.skydo.com/blog/minimise-TDS-foreign-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">TDS</a>, this blog aims to empower you with the knowledge to navigate fiscal responsibilities confidently.

Here is the updated TDS rate chart for FY 2023-24:

TDS Rate Charts Where the Company is a Domestic Company

Here is a detailed table for TDS rate charts for a domestic company registered in India:&nbsp;

TDS Rates Applicable for a company other than a Domestic Company

Here is a detailed table for the TDS rates applicable for a company other than a domestic company:&nbsp;

TDS is a system where tax is deducted at the source of income, and compliance with the prescribed rates is essential to ensure smooth financial operations. It is important to adhere to the prescribed TDS rates, a legal requirement under the <a href="https://www.skydo.com/blog/withholding-tax-india-all-you-need-to-know?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Income Tax Act</a> of 1961, as failure to comply may result in penalties and legal consequences.

Hence, knowing the correct TDS rates is essential for businesses to carry out financial transactions smoothly. It helps in accurate budgeting and financial planning and prevents disruptions due to legal issues.&nbsp;

Ans: The current TDS rate chart depends on the nature of the expense under specific sections. You can find more details about the TDS rate chart by navigating to the section ‘TDS Rate Chart for FY 2023-24’ in the above blog.&nbsp;

Q2. What are the TDS rates for freelance services?

Ans: For freelance services, TDS is deducted under the ‘Professional and Technical Services’ in the ITR, which is 10% of the total payments received.&nbsp;

Ans: Tax Deducted at Source (TDS) is a mechanism through which the government collects income tax at the source of income itself. On the other hand, Tax Collected at Source (TCS) is a similar concept to TDS, but it involves the collection of tax at the source of the sale of specified goods or services.

Ans: Under section 194N, cash withdrawal exceeds a certain amount (limit- Rs 1 crore). In case Rs 20 lakh or more is withdrawn by the person who has not filed an ITR for the last three years, for which the due date of filing the ITR has expired, the TDS rates shall be applicable as per the below slab:a) amount more than Rs.20 lakh but up to Rs. 1 crore: 2%b) amount exceeding Rs. 1 crore: 5%

Ans: TDS is calculated using the following formula: TDS Amount = Payment Amount x ( TDS Rate/100 ​ )

Ans: Tax Deducted at Source (TDS) in salary refers to the process of deducting income tax from an employee's salary at the source itself, i.e., by the employer.

Q7. Does the TDS rate change every financial year?

Ans: It is not mandatory to change the TDS rates every year. However, every year, when the Finance Minister presents the budget, various changes are generally introduced in relation to TDS.&nbsp;

Ans: A Tax Deducted at Source (TDS) certificate is an official document issued by the deductor (the person responsible for deducting TDS) to the deductee (the person from whose income TDS is deducted). The certificate details the TDS deducted and deposited with the government during a particular financial year.

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GlobalTech Solutions, an I.T. service export provider headquartered in India, secured a contract with a client in Germany. As GlobalTech Solutions progressed with the project and submitted their invoices for the services rendered, they were surprised to receive reduced payments from their client in Germany. The unexpected reduction in revenue not only strained their financial resources but also affected their profit margin.&nbsp;

Upon further investigation, they discovered that the client deducted withholding tax. Typically, the payer deducts this tax amount before remitting the funds to the non-resident service provider. GlobalTech Solutions was unaware of this fact initially.

While they lost a certain amount due to a tax compliance oversight, you can avoid such financial setbacks by learning everything you need to know about withholding tax in this guide.&nbsp;

Withholding tax is the amount deducted at the payment source by the payer before remitting the amount to the recipient. This tax amount is paid directly to the government.&nbsp;

In India, withholding tax takes the form of <a href="https://www.skydo.com/blog/ways-to-ensure-zero-tds-leakage?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Tax Deducted at Source (TDS)</a> for domestic transactions. However, withholding tax in international or cross-border transactions includes collecting taxes from non-residents on income generated within their jurisdiction.

Withholding tax requires the payer to hold back a certain percentage of the payment and remit it to the tax authorities on behalf of the recipient. This tax withholding serves as a prepayment of the recipient's tax liability.&nbsp;

Tax expert and CA, <a href="https://www.linkedin.com/in/juhi-shah-633127154/">Juhi Shah</a>, states, "Withholding tax ensures that non-resident individuals or entities contribute their fair share of taxes on income earned within a country's borders. Therefore, proper withholding tax compliance is not just a legal obligation but an essential component of responsible tax management."

Let’s consider an example of a software development company based in India providing I.T. services to a client based in the USA. The agreed-upon fee for the services is $10,000. However, the USA imposes a <a href="https://taxsummaries.pwc.com/united-states/corporate/withholding-taxes">30% withholding tax</a> on payments made to non-resident service providers.&nbsp;

When the software development company invoices the client for $10,000, the client must withhold 30% of that amount ($3,000) as withholding tax. Thus, the client remits $7,000 to the software development company.&nbsp;

Other countries, like The United Kingdom, <a href="https://www.dentons.com/en/services-and-solutions/global-tax-guide-to-doing-business-in/united-kingdom">impose 20%</a> on certain interest payments, rents or royalties. <a href="https://taxsummaries.pwc.com/australia/corporate/withholding-taxes">In Australia</a>, withholding tax applies to payments made to non-residents for certain types of income, such as dividends, interest, royalties, and fees for the performance of entertainment or sports activities. The withholding tax rate is generally 10%.

However, the landscape of international tax laws is complex and dynamic. Each country has its regulations and tax rates. Therefore, in the previous example, while the client deducted withholding tax in the US, the remaining income of $7000 may be subject to another form of tax in India. This phenomenon is known as double taxation.

This form of taxation applies to the same income in two or more jurisdictions. It can happen when income is subject to tax in the country where it is earned and then again in the country where the taxpayer resides.

Offering tax credits or exemptions can avoid or minimise double taxation. Therefore, countries enter into double tax treaties that aim to provide relief to taxpayers by specifying rules for allocating taxing rights.&nbsp;

According to <a href="https://www.oecd.org/en/topics/tax-treaties.html?no_follow=true">a report</a> by the Organization for Economic Co-operation and Development (OECD), more than 3,000 double tax treaties are in effect worldwide, reflecting the intricate nature of international taxation.&nbsp;

Then, how can you <a href="https://www.skydo.com/blog/cut-international-transaction-costs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">avoid losing your business’s hard-earned money</a> in international taxes?&nbsp;

Imagine a tech company in India called ABC Tech Solutions. They provide tech services to companies around the world. One of their clients, XYZ Corporation, owes them Rs 1,000,000 for services.

As per RBI rule, before paying this money to ABC Tech Solutions, XYZ Corporation can set aside a portion for taxes. Let's say it's 10%, which amounts to Rs 100,000. So, instead of paying the full Rs 1,000,000 to ABC Tech Solutions, XYZ Corporation pays Rs 900,000 and keeps Rs 100,000 separately for taxes.

It's now XYZ Corporation's responsibility to give this Rs 100,000 to the government as withholding tax. They're holding onto it on behalf of ABC Tech Solutions.

ABC Tech Solutions, receive Rs 900,000 in their account, but they know that Rs 100,000 has been kept aside for taxes by XYZ Corporation. When ABC Tech Solutions files its income tax return, it can show this Rs 100,000 as a credit.&nbsp;

It helps them because they've technically already paid some tax through XYZ Corporation's withholding.

Let's discuss the current rates for withholding tax paid by non-resident individuals. The following rates are applicable.

These rates apply to countries without a Double Taxation Avoidance Agreement (DTAA) with India.

What Is the Difference Between Withholding Tax and TDS?

Let's break down the key differences between Withholding Tax (WHT) and Tax Deducted at Source (TDS).

In India, a withholding tax certificate is a document acknowledging the deduction of taxes at the source. It is issued by the payer to the payee, confirming the amount withheld from payments made. This certificate is crucial for the recipient to claim credit for the deducted tax while filing income tax returns.&nbsp;

It includes details such as the payer and payee's information, the amount paid, the applicable tax rate, and the actual tax withheld. This certificate serves as evidence of tax compliance and ensures transparency in financial transactions, facilitating accurate reporting and adherence to regulatory requirements in India's taxation framework.

Calculating withholding tax involves a series of steps to ensure that the appropriate amount of tax is deducted from a payment. Here's a breakdown of the process:

Tips/Best Practices for Managing Withholding Tax Obligations&nbsp;

The following tips can help overcome the complexities of international tax laws, varying tax rates, and evolving regulations concerning withholding tax.

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International Payment Service Providers and Withholding Tax

<a href="https://www.skydo.com/blog/online-payment-gateway-service-provider-opgsp?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Payment service providers</a> are crucial in helping businesses navigate withholding tax issues when engaging in international transactions. They often offer built-in tools for calculating and deducting withholding tax from payments, ensuring accuracy and compliance.&nbsp;

They also provide reporting functionalities that generate comprehensive tax reports, simplifying documentation. Additionally, they may offer tax advisory services or collaborate with tax experts to navigate complex tax regulations.

This way, you can safeguard your business’s financial interests, maintain regulatory compliance, and foster successful international business relationships.

Q1. How might currency fluctuations affect my withholding tax obligations as an IT service provider?

Ans. Withholding tax is typically calculated based on the payment amount in the local currency. Exchange rate fluctuations can affect the tax liability.

Q2. How can I determine if a client's country has a tax treaty with my country to avoid double taxation?

Ans. You can refer to both countries' official tax authorities' websites to determine if a client's country has a tax treaty with your country. Alternatively, you can seek assistance from tax professionals who can analyse the specific treaty provisions applicable to your situation.

Q3. What are the consequences of non-payment of withholding tax?

Ans. Non-payment of withholding tax leads to severe consequences, including penalties and legal actions. It can result in financial losses, reputational damage, and complications with tax authorities, impacting a company's operations.

Q4. How does the nature of my IT export services affect the withholding tax? Are there specific exemptions I should be aware of?

Ans. The nature of your IT export services can impact the applicability of withholding tax and potential exemptions. Some countries may have specific provisions or exemptions for certain types of services or income.

Q5. What role can a global payment service provider play in helping me manage my withholding tax obligations?

Ans. A global payment service provider facilitates accurate calculation, deduction, and withholding tax reporting. They may provide built-in tools for tax calculations, generate tax reports, and offer compliance support. Collaborating with a reputable payment service provider, like Skydo, can streamline your payment processes and ensure compliance with withholding tax regulations across different jurisdictions.

Q6. What is the due date to file the Withholding returns?

Ans. The due date to file withholding returns is crucial; it typically falls within a month after the end of the quarter in India.

Q7. What is the Withholding tax payment due date?

Ans. Withholding tax payment is due on or before the 7th day of the month following the month of deduction, as per Indian tax regulations.

Q8. How is the assessment of Non-Resident Indians done?

Ans. Assessment of Non-Resident Indians involves evaluating their global income and determining tax liability based on applicable tax rates and treaties.

Q9. Who is responsible for withholding tax?

Ans. The entity making payments is responsible for withholding tax, ensuring deduction, and remittance to the government per the specified rates.

Q10. Which incomes are subject to withholding tax?

Ans. Various incomes, such as salaries, interest, dividends, and royalties, are subject to withholding tax, serving as a mechanism to collect tax at the source before funds are disbursed.

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Doing your GST refunds as a business owner can feel like trying to solve a Rubik's Cube. The complicated forms, constant compliance checks, and fear of messing up and facing penalties can be overwhelming, not to mention the delays, cash flow issues, and even legal obstacles that can occur if you make one wrong move. Instead of spending time on growing your business, you're buried in paperwork and tax codes.&nbsp;

What if there's a way to make all these problems go away?&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> is an approved tool by chartered accountants that makes <a href="https://www.skydo.com/blog/how-to-claim-input-tax-credit-refund-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">GST refunds</a> easier than ever before. No longer will you need to stress over a long and tedious refund process, as Skydo makes the process accurate, quick, and hassle-free – so you can get back to what matters most: running your business.

Let’s learn how Skydo helps with GST Refunds.

Skydo is revolutionizing the current financial landscape with its advanced platform. With its cutting-edge technology and user-centric features, Skydo has quickly become the go-to platform for anyone needing help with GST-related compliances.

Key features that make Skydo a standout choice

1. Effortless Letter of Undertaking (LUT) Integration

An <a href="https://www.skydo.com/blog/everything-you-need-to-know-about-lut?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">LUT is vital for GST compliance</a>. To draft the LUT, you can simply log into the GST portal—an efficient digital platform. Go to the 'SERVICES' Tab &gt; 'User Services' &gt; Select 'Furnish Letter of Undertaking (LUT)'.

Select the financial year applicable for this LUT and fill in the necessary details on the Letter of Undertaking Form/GST RFD-11 that appears on the screen. Once you receive confirmation, you can capture the details of the LUT for further reference.

When creating your invoice on Skydo's platform, you'll find a dedicated section to include the LUT, accommodating up to 200 characters. This means that as you generate invoices for your international clients, you can effortlessly ensure tax efficiency.

You can seamlessly integrate the LUT into your invoice during its creation, avoiding delays and the hassle of jumping through multiple hoops for tax compliance.

2. FIRAs (Foreign Inward Remittance Advice)

Traditionally, you'd have to wait for days to receive a <a href="https://www.skydo.com/blog/all-you-need-to-know-about-FIRC-a-complete-guide?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Foreign Inward Remittance Advice (FIRA)</a> to confirm payment settlement. However, Skydo steps in to change the game. As soon as your client's payment is settled, you receive the FIRA instantly. This real-time availability doesn't just accelerate your financial processes; it's like having a financial assistant ensuring that you're always in the know.

When you <a href="https://www.skydo.com/blog/seamlessly-accept-international-payments-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">accept international payments</a> to your bank account, the bank requires you to specify the purpose code and provide supporting documents like FIRA against each inward receipt.

With Skydo, you no longer need to worry about remembering purpose codes or flipping through thick rulebooks when sending invoices. The system will automatically provide the correct purpose codes based on the code you provided before, eliminating the need to go to the bank to obtain new ones each time.&nbsp;

It's like having a built-in expert to handle the intricacies of compliance, making your life simpler and your business more efficient. 

As a business owner preparing for an upcoming audit, you need access to comprehensive transaction records. With Skydo receipts, you get a detailed breakdown of your transactions, serving as a reliable tax invoice. It's like having an accountant at your fingertips, simplifying accounting, record-keeping, and financial transparency.

Skydo's technology streamlines the process while adding layers of accuracy, transparency, and efficiency, not typically found in traditional methods.

Skydo is more than just a payment and refund system - it provides an all-in-one solution for managing your financial operations such as:

Skydo is the perfect partner for making your financial life easier.&nbsp;

With Skydo, you don't need to be an expert in tax law because the easy-to-navigate interface is designed for simplicity. In addition, automated processes ensure accuracy and financial compliance, saving time and effort.&nbsp;

The platform's transparency feature lets you track payments and refunds in real-time. With features like budgeting, bill payment, and account monitoring, you can easily streamline your financial processes. Make sure not to miss out on all that Skydo has to offer and<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link"> book a demo today</a>.

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Cash flow problems. Poor investment decisions.&nbsp;

Unplanned levels of debt. Complex international tax laws.&nbsp;

Inefficient operations. And inadequate financial planning.&nbsp;

Such risks in a tech export business are not isolated - they're interconnected and often causative. However, they have a common solution: having a good chartered accountant on your side.&nbsp;

With their finance, taxation, and regulatory expertise, chartered accountants can help you navigate the choppy waters of international business and ensure your enterprise stays afloat. They can help you optimise your finances, reduce your tax burden, and make strategic decisions that position your business for success.

However, it's not just about avoiding pitfalls- a chartered accountant can also help you seize opportunities and chart a course for growth.&nbsp;

9 Ways a Chartered Accountant Can Help Your Tech Export Business

When managing finances, you may face several daunting challenges, especially if you are unfamiliar with the intricacies of international business. While not a miracle worker, a CA can help you with many aspects of financial management or, at the very least, give you sound advice upon which you can act.&nbsp;

CA Ravi Mamodiya, a seasoned chartered accountant professional, explains, “Understanding the numbers in your business is essential, but interpreting them is where the real value lies. From an economic perspective, pricing has a compounding effect on your margins, and distribution costs can impact your sales. Effective communication of these numbers is crucial, and your CA can help you identify areas where your business strategy may be falling short.”

Lean towards your CA when you need assistance in the following areas.

While operating internationally, your tech export business may have to deal with multiple currencies and their highly volatile exchange rates. These fluctuations can significantly impact your bottom line, making it difficult to plan and forecast finances accurately.

A CA can help you develop a realistic budget for your business, considering factors such as cash flow, revenue projections, and capital expenditures. They analyse your financial statements and identify areas to improve your profitability. This way, the right CA can help you develop a cash flow management plan, ensuring you have enough cash to meet your financial obligations and make strategic investments in your business.

Every country has its tax regulations which govern domestic transactions. These can be complex and dynamic. For example, if you provide consulting services in the US, you must comply with their tax regulations, <a href="https://www.skydo.com/blog/how-to-claim-input-tax-credit-refund-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">file tax returns</a>, and withhold taxes on payments made to the Indian business. However, keeping up with tax laws in different countries is time-consuming and costly.

A CA can help you understand these laws and <a href="https://www.skydo.com/blog/ensuring-financial-compliance-5-tips-to-safeguard-your-businesss-finances?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">ensure compliance</a>. They can help you understand the difference between withholding taxes for domestic and import/export transactions. They can also help businesses with the necessary documentation, such as <a href="https://www.skydo.com/blog/form-15ca-cb?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Form 15CA and Form 15CB</a>, which are required for making international payments.

Exporting your services to countries with unique financial requirements, such as different payment methods and invoicing practices, is challenging.&nbsp;

For example, a US-based client may prefer a specific payment method that is not common in India. You need to ensure they are set up to receive payment through the client's preferred method, whether it is a wire transfer, credit card, or another method. You must be aware of any charges involved when accepting payments through these avenues.

A CA can help you navigate the invoicing and payments process and ensure they comply with all regulatory requirements.

Concerning payment methods, Rohit Khurana, a Chartered Accountant professional and finance lead at Skydo, explained, “A CA can help you to understand the costs involved across the different payment methods. There are some costs that are visible and apparent, but there are some costs that are not apparent, like FX markup, etc. In payment methods, a CA can guide you to analyse regulatory mechanisms and cost comparisons.”

After making international payments, businesses need to comply with the Foreign Exchange Management Act (FEMA) regulations. One of the key requirements under FEMA is filing the <a href="https://www.skydo.com/blog/all-you-need-to-know-about-FIRC-a-complete-guide?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Foreign Inward Remittance Certificate (FIRC)</a> with the bank. A <a href="https://www.skydo.com/blog/chartered-accountants-approve-skydo-for-seamless-gst-refunds?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Chartered Accountant (CA)</a> can help you comply and avoid penalties.

Additionally, the Goods and Services Tax (GST) is a crucial part of business in India. All businesses, including tech export businesses, must comply with GST regulations. Although there is no GST payable on invoices denominated in foreign currency, a CA can help you understand the payments of reverse charges and how to claim refunds, among other regulations.

To avoid tax penalties, Rohit Khurana, a chartered accountant professional and finance lead at Skydo, suggests, “Any payment channel you are using needs to ensure that the channel provides you FIRC for all the foreign payments. If the Income Tax Department charges you for not paying the GST, you can provide FIRCs for all your foreign payments.”

5. Claiming Subsidies and Incentives Applicable

The Indian government offers various subsidies and incentives to promote exports. However, the challenge lies in the right way to claim them. A good CA can help you understand these and help you assert their benefits.

For example, the government offers various export promotion schemes, such as the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS).&nbsp;

Also known as the price that one company's subsidiary charges another subsidiary for goods or services, it can be complex, especially for tech export businesses operating in multiple countries. A CA can ensure that you follow the proper transfer pricing guidelines, which helps you avoid potential penalties and get a fair price for your goods or services.

This step is crucial in setting up a tech export business. A CA helps you choose among the various legal structures available, such as Limited Liability Partnership (LLP), Private Limited Company (PLC), Sole Proprietorship, and One Person Company (OPC).

CAs can help businesses develop Standard Operating Procedures (SOPs), which can help ensure that repetitive tasks are standardised, saving time and preventing human error.

CAs ensure that your financial records are accurate, up-to-date, and compliant with relevant laws and regulations. It helps eliminate the need for in-house high-cost resources until your business is large enough to support a full-time team.

“It's important to bring diverse perspectives and strategies to your business, including cross-border expertise and a global mindset. With this approach, you can navigate international tax laws and other challenges and stay competitive in a global marketplace,” states CA Ravi Mamodiya.

If you're running a business that deals with international transactions, we know how tough it can be to manage payments and currency exchange. That's where Skydo comes in.

We’re a payment partner that can help simplify things and save money.

One of the ways we can help you is by providing competitive FX rates for transactions. This means you won't have to worry about paying high conversion fees or dealing with unfavourable foreign exchange rates. We also eliminate the need for multiple bank accounts in different currencies, saving you time and hassle.

Skydo can help you streamline invoice payments and manage your cash flow so you can focus on growing your business.&nbsp;

With our user-friendly platform, you can track payments in real-time and stay on top of your finances.

International trade is a highly competitive arena where every opportunity counts. By working with a trusted chartered accountant, you can streamline your business’s financial operations, reduce costs, and improve profitability. Look for professionals with expertise in navigating complex financial regulations, optimising tax planning, and ensuring regulatory compliance.&nbsp;

Furthermore, with the right payment partner, you can automate your business’s payment processing, reduce errors and fraud, and improve cash flow. When choosing a payment partner, look for a provider offering flexible, scalable solutions tailored to your specific needs. The provider should have a proven track record of reliability and security, with robust fraud detection and prevention measures in place.&nbsp;

Q1. Why do I need a chartered accountant for my tech export business?

Ans: A chartered accountant brings expertise in financial management, compliance, and taxation, ensuring your tech export business adheres to regulations, maximises profits, and maintains financial health.

Q2. What specific services can a chartered accountant offer to my tech export business?

Ans: Chartered accountants can provide services such as tax planning, financial audits, risk management, and advice on international transactions. They play a crucial role in ensuring compliance with complex regulations in the tech export industry.

Q3. How can a chartered accountant assist in optimising tax liabilities for my tech export business?

Ans: Chartered accountants specialise in tax planning strategies, helping your tech export business minimise tax liabilities legally. They can identify tax incentives, credits, and deductions that apply to the tech industry, ensuring you retain more of your earnings.

Q4. How does a chartered accountant help in managing cross-border transactions for my tech exports?

Ans: Chartered accountants understand the intricacies of international finance and can guide your business through the complexities of cross-border transactions, ensuring compliance with regulations, mitigating risks, and maximising financial efficiency.

Q5. Can a chartered accountant help in budgeting and financial forecasting for my tech export business?

Ans: Yes, chartered accountants play a crucial role in budgeting and financial forecasting. They analyse historical data, market trends, and business goals to create realistic financial plans, helping your tech export business make informed decisions and achieve long-term success.

Q6. How can a chartered accountant assist in risk management for my tech export business?

Ans: Chartered accountants evaluate potential risks and implement strategies to mitigate them. Whether it's currency fluctuations, regulatory changes, or market uncertainties, they help your tech export business navigate challenges and maintain financial stability.

Q7. Will a chartered accountant help in preparing financial reports for stakeholders and investors?

Ans: Absolutely. Chartered accountants are skilled in preparing accurate and comprehensive financial reports. This is vital for gaining investor confidence, meeting regulatory requirements, and providing stakeholders with a clear picture of your tech export business's financial performance.

Q8. How can a chartered accountant contribute to the overall growth and strategy of my tech export business?

Ans: Chartered accountants act as financial advisors, helping your tech export business make strategic decisions based on sound financial analysis. Their insights into financial data and market trends contribute significantly to the overall growth and success of your business.

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When making payments to non-residents, you must deduct a certain tax percentage at the source as per Section 195 of the Income Tax Act.

Additionally, effective management of TDS is paramount for tech exporters to minimise its impact on the bottom line. By optimising tax planning strategies, such as leveraging double taxation avoidance agreements (DTAA), correctly utilising forms 15CA and 15CB, and exploring available exemptions or deductions, you can minimise TDS leakage and preserve their financial resources.

Proactive TDS management ensures compliance with tax regulations, reducing the risk of penalties or legal complications. By understanding the nuances of TDS on foreign payments and adopting effective management strategies, you can positively influence their cash flow, profitability, and overall financial stability in international transactions.



Minimising TDS on foreign payments is a key objective for tech exporters to optimise their financial outcomes. The following strategies can help reduce TDS on these transactions.

1. Double Taxation Avoidance Agreements (DTAA)&nbsp;

DTAA is a bilateral agreement or treaty between two countries to prevent taxpayers from being subject to taxation on the same income in both jurisdictions. DTAA reduces or eliminates taxes in one country for income already taxed in another country.&nbsp;

Leveraging such tax agreements is a paramount strategy for tech exporters aiming to minimise TDS on foreign payments. These international agreements often provide provisions to lower <a href="https://www.skydo.com/blog/decoding-withholding-tax-an-i-t-export-service-providers-toolkit-for-simplifying-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">withholding tax</a> rates, optimising financial returns for businesses engaged in cross-border transactions.&nbsp;

By understanding and utilising the provisions of DTAA, tech exporters can minimise their TDS liability.

<a href="https://www.skydo.com/blog/form-15ca-cb/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Form 15CA</a> is a declaration form that provides information about the purpose and nature of the remittance. A qualified <a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">chartered accountant</a> issues Form 15CB certifying the transaction details.&nbsp;

As Section 195 of the Income Tax Act prescribes, these forms ensure the proper reporting of foreign remittances and help determine the applicable TDS rates. Tech exporters should ensure accurate and timely form filing to minimise potential TDS discrepancies.

Effective tax planning minimises TDS on foreign payments for tech exporters. By carefully structuring transactions, exploring available exemptions, and aligning business operations with tax regulations, exporters can strategically reduce the withholding tax burden.&nbsp;

Adopting a proactive and well-informed approach to tax planning ensures that tech exporters retain more of their earnings from international transactions, enhancing overall financial efficiency and competitiveness in the global market.

As of <a href="https://economictimes.indiatimes.com/wealth/tax/new-tcs-rule-to-come-into-effect-from-october-1-2023-finance-ministry/articleshow/101345956.cms">October 1, 2023</a>, a significant update has been implemented regarding Tax Deducted at Source (TDS) in India. The Ministry of Finance has introduced a notable change related to foreign remittances.&nbsp;

There will be no Tax Collection at Source (TCS) on foreign remittances of up to Rs 7 lakh per financial year. This update, outlined in a notification released on June 28, 2023, signifies a restoration of the Rs 7 lakh threshold per individual for TCS on all categories of <a href="https://www.skydo.com/blog/what-is-lrs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Liberalised Remittance Scheme (LRS)</a> payments.&nbsp;

This threshold applies irrespective of the purpose and includes all modes of payment. Therefore, the first Rs 7 lakh remittance under LRS will not incur TCS, providing relief for individuals engaging in foreign transactions.

A practical guide below features a comprehensive checklist and step-by-step approach to minimise TDS leakage.

Minimising TDS on foreign payments requires careful consideration of legal requirements, proper documentation, and proactive tax planning. By following this practical guide and seeking professional assistance, tech exporters can effectively minimise TDS leakage, optimise their tax position, and enhance their profitability in international transactions.

Minimising Tax Deducted at Source (TDS) on foreign payments is a crucial aspect of financial management for individuals and businesses engaged in <a href="https://www.skydo.com/blog/the-pros-and-cons-of-cross-border-payment-solutions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">cross-border transactions</a>. By understanding the intricacies of TDS regulations, exploring available exemptions and provisions, and leveraging tax treaties effectively, one can significantly reduce the impact of TDS on international payments.

Implementing proper documentation, ensuring compliance with relevant tax laws, and seeking professional advice when needed are essential steps in the journey to minimise TDS. It's not just about saving money; it's about optimising financial processes and fostering a smoother international business environment.

As the global economy continues to evolve, staying informed about changes in tax regulations and proactively adapting strategies will be key to successfully navigating the complexities of TDS on foreign payments. By adopting a proactive and informed approach, individuals and businesses can not only minimise TDS but also pave the way for more efficient and cost-effective cross-border financial transactions.

Q1. What are the penalties for non-compliance with TDS rules on foreign payments?

Ans. Non-compliance penalties may include interest charges on the unpaid tax amount, penalty levies, and disallowance of expenses. The penalties vary based on the nature and severity of the non-compliance, and it is essential to adhere to TDS rules to avoid these consequences.

Q2. How does the recent change in tax laws affect TDS on foreign payments for tech exporters?

Ans. The recent change in tax laws does not affect TDS on foreign payments for tech exporters. The recent amendment pertains to TCS applicability and has no bearing on TDS.&nbsp;

Q3. Can I claim a refund for TDS on foreign payments? If yes, what is the process?

Ans. Yes, it is possible to claim a refund for TDS on foreign payments if the taxpayer's total tax liability is lower than the TDS amount deducted. The process involves filing an income

Q4. Does the size or nature of my tech export business affect the TDS rules applicable to me?

Ans. The size or nature of your tech export business does not generally affect the TDS rules applicable to you. TDS rules depend on the nature of the payment and the provisions outlined in the Income Tax Act. However, certain requirements or thresholds may vary depending on specific circumstances.

Q5. Are any specific TDS rules for tech exporters that differ from general businesses?

Ans. Yes, certain specific TDS rules for tech exporters may differ from general businesses, such as provisions related to software royalty payments and technical services.

Q6. How to transfer money from the USA to India without paying taxes?

Ans: Transferring money from the USA to India without paying taxes is not advisable, as tax regulations apply. Utilising legal channels, like NRE or NRO accounts, can help manage tax implications.

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