Withholding Tax on Non-Resident Payments India

Authored by R & D Law Chambers LLP | Practice led by Ravish Bhatt — Advocate, Bar Council of Gujarat (Enrolment G/504/2008) | Solicitor of the Senior Courts of England and Wales (SRA No. 492 477) | ADIT, Chartered Institute of Taxation, London | Published: June 2026 | Last reviewed: June 2026

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The Stakes of Getting Withholding Tax Wrong

Under Section 393(2) of the Income Tax Act 2025, every person making a payment to a non-resident on India-chargeable income must deduct tax at source with no minimum threshold. Under-deduction makes the payer an assessee-in-default under Section 398: the tax shortfall is recoverable as the payer’s own liability, interest accrues from the date of deductibility, and the payment is disallowed in the payer’s hands under Section 35(b) until the tax is subsequently deducted and paid.

Cross-border payments to non-residents engage one of the most consequential obligations in Indian tax law. Any person making a payment to a non-resident on income chargeable in India must deduct tax at source under Section 195 of the Income Tax Act 1961, now carried forward as Section 393(2), Table Sr. No. 17 of the Income Tax Act 2025, which came into force on 1 April 2026. The obligation is cast on every person — resident or non-resident — and there is no threshold below which it falls away.

The default withholding rates under the Act, augmented by surcharge and cess, are blunt instruments. They are calibrated to the gross payment, not to the recipient’s actual Indian tax liability. Where a double taxation avoidance agreement applies, the statutory rate will frequently exceed the applicable treaty rate. Where only part of a composite payment is chargeable to tax in India, the default approach produces over-deduction on the non-taxable portion. In both situations, the excess is not lost permanently — it is refundable, but refunds move at the pace of the tax administration, not the commercial transaction.

The consequences of under-deduction are more immediately damaging. A payer who fails to deduct, or deducts less than required, is treated as an assessee-in-default under Section 201 of the 1961 Act, now Section 398 of the 2025 Act. The tax shortfall is recoverable from the payer as if it were their own liability. Interest accrues from the date of deductibility. The payment is disallowed in the payer’s hands under Section 40(a)(i) of the 1961 Act (Section 35(b) of the 2025 Act) for the tax year in which the default occurs; the deduction is available only in the year in which the tax is subsequently deducted and paid. Penalties and, in the most serious cases, prosecution follow.

The withholding tax question is therefore not a back-office compliance matter. It is a front-of-transaction legal and commercial question, and the window to address it correctly closes at the moment of payment or credit, whichever is earlier.

Three Mechanisms, Three Problems — The Relief Provisions

Three statutory mechanisms reduce or eliminate over-withholding on cross-border payments. Section 395(1) addresses the recipient’s total India income and issues a certificate calibrated to the actual liability. Section 395(2) determines the taxable proportion of a composite payment where only part constitutes India-source income. The Form 145/146 framework aligns payer remittance compliance with the applicable treaty rate.

The regime for reducing or eliminating excess withholding on cross-border payments operates through three distinct mechanisms. Which one applies depends on whether the client is the payer or the recipient, and on the nature of the problem — whether it is the recipient’s overall tax position, the taxable character of the specific payment, or the applicable treaty rate.

The primary withholding obligation

The default withholding rates are substantial. Interest, royalties, and fees for technical services paid to foreign companies are typically subject to domestic withholding at 20% on the gross amount, before surcharge and health and education cess of 4%, which can take the effective rate to 22% or higher depending on the surcharge applicable to the recipient’s income level. Capital gains on indirect transfers and other residuary sums are taxed at the applicable Finance Act rates with similar additions. Where a DTAA applies and the recipient is entitled to treaty rates, the gap between the default domestic rate and the applicable treaty rate can be substantial: India’s treaty rate for royalties and fees for technical services is frequently 10% to 15%, against a domestic default of 20% plus surcharge and cess.

Mechanism 1: Certificate calibrated to the recipient’s total income — Section 197 / Section 395(1)

Section 395(1) of the Income Tax Act 2025 allows a non-resident recipient to apply to the Assessing Officer for a certificate authorising deduction at a lower rate or nil deduction, where the recipient’s total India income justifies it. Once issued, the certificate binds the payer for its validity period. A material expansion under the 2025 Act: Section 395(1) now covers income types previously excluded under Section 197(1) of the 1961 Act.

Where the recipient’s actual Indian tax liability, taken across their total income in India, justifies deduction at a rate lower than the default rate or no deduction at all, the recipient may apply to the Assessing Officer for a certificate to that effect. Under the 1961 Act, this was Section 197, with the application made in Form 13 through the TRACES portal. Under the 2025 Act, the corresponding provision is Section 395(1), with the application made in Form 128. The AO, on being satisfied that the recipient’s estimated total income justifies a lower rate or no deduction, issues a certificate specifying the authorised rate and its validity period. Once issued, the payer is bound by the certificate for its duration.

This mechanism addresses the recipient’s position holistically — their total India income, applicable deductions, treaty entitlement, and effective liability. It is the appropriate route where the entire question is one of over-deduction relative to the recipient’s true tax position: a foreign company entitled to a 10% treaty rate on royalties being subjected to a 22% default deduction, or a non-resident individual whose total India income falls below the taxable threshold after applicable deductions.

A material expansion under the 2025 Act: Section 395(1) is available in respect of any income on which tax is required to be deducted under Chapter XIX, not merely the specified categories of income that qualified under Section 197(1) of the 1961 Act. Income types previously excluded from the lower deduction certificate mechanism, such as certain payments under Section 194R or foreign interest under Section 194LC, now qualify. The scope of available relief has accordingly broadened.

Mechanism 2: Determination of the taxable proportion of a payment — Section 195(2) / Section 395(2)

Where a cross-border payment is composite and only a portion constitutes income chargeable in India, the payer may apply under Section 395(2) for an AO determination of the taxable proportion. TDS under Section 393(2) then applies only to that proportion. Attempting to self-assess a non-taxability position on such a payment without a Section 395(2) determination exposes the payer to Section 398 default proceedings if Revenue later takes a different view.

Where the question is not the recipient’s overall tax position but the taxable character of the specific payment itself — because the payment is composite and only a portion of it constitutes income chargeable in India — a different mechanism applies. The payer may apply to the AO for a determination of the appropriate proportion of the sum chargeable to tax. Under the 1961 Act, this was Section 195(2). Under the 2025 Act, the corresponding provision is Section 395(2), with the procedure governed by the Income Tax Rules 2026. The AO determines the proportion chargeable, and TDS under Section 393(2) is then deducted only on that proportion.

This mechanism addresses the payment itself, not the recipient’s overall income. It is the appropriate route where a cross-border payment bundles taxable and non-taxable elements: a service fee that includes reimbursement of costs incurred in India with no income element, a loan repayment that includes principal, or a composite contract where only the services component gives rise to Indian-source income. Attempting to self-assess a non-taxability position on such a payment without the protection of an AO determination under Section 395(2) exposes the payer to default proceedings under Section 398 of the 2025 Act if Revenue subsequently takes a different view of the taxable character of the payment.

Treaty rate alignment and the Form 145/146 framework

For payments exceeding Rs. 5 lakhs, the payer must file a remittance declaration in Form 145, supported either by an AO certificate under Section 395 in Part B, or a Chartered Accountant’s certificate in Form 146 in Part C. Where a Section 395 certificate is in place, the Form 146 requirement falls away — an advantage of the formal certificate route that reduces payer compliance burden and strengthens protection against default proceedings.

Where a DTAA provides a rate lower than the domestic withholding rate and the payer wishes to apply that rate without a certificate, the payer may do so provided the recipient furnishes a valid Tax Residency Certificate and a Form 41 declaration (Form 10F under the 1961 Act) filed on the Indian income tax portal. For payments exceeding Rs. 5 lakhs, the payer must file a remittance information declaration in Form 145 (replacing Form 15CA under the 2025 Act rules), supported by either an AO certificate under Section 395 in Form 145 Part B, or a Chartered Accountant’s certificate in Form 146 (replacing Form 15CB) in Form 145 Part C. Where a Section 395 certificate has been obtained, the CA certificate requirement under Part C is dispensed with — an advantage of the formal certificate route over self-assessment of the treaty rate.

Given the post-Tiger Global heightening of the documentary and substance standard for treaty entitlement, discussed below, a Section 395 certificate provides AO-approved formal authorisation that carries greater protection than a self-assessed treaty rate application, however well-documented.

The Treaty Entitlement Dimension

“Authority for Advance Rulings v. Tiger Global International II Holdings (Supreme Court of India, 15 January 2026) reframes what a certificate application under Section 197 / Section 395(1) actually is. Tiger Global did not begin with an assessment — it began with a nil withholding certificate application.” — Internal practitioner analysis, R & D Law Chambers LLP

After Tiger Global, a Tax Residency Certificate is necessary but no longer sufficient. The evidentiary standard for treaty entitlement now demands contemporaneous documentation of genuine commercial substance — functional reality in the treaty jurisdiction, independent decision-making, and a structure whose primary rationale is not elimination of Indian tax. Where a certificate is denied or issued at a rate inconsistent with treaty entitlement, that outcome may constitute taxation not in accordance with the applicable DTAA, and MAP evaluation through the non-resident’s home jurisdiction competent authority should begin immediately — not after assessment, and not after litigation has run for years.

We advise on treaty entitlement documentation before the application is filed, engage with the AO on treaty-based grounds during the process, and where a certificate is denied or wrongly rated, assess whether MAP engagement is the appropriate response. For a detailed analysis of what Tiger Global decided, what the government corrected, and what remains live, see our published analysis in International Tax Review.

Services

R & D Law Chambers acts on both sides of the withholding transaction. For non-resident recipients: Section 395(1) certificate applications, treaty documentation review, and MAP assessment where a certificate is denied or issued at an adverse rate. For Indian payers: Section 395(2) applications on composite payments, Form 145/146 remittance compliance, Section 398 default proceedings, and ITAT representation.

Recipient-side: obtaining the right rate or nil deduction

Where the applicable DTAA provides a lower withholding rate than the domestic default, the non-resident has two routes: direct application of the treaty rate by the payer on the basis of a valid TRC and Form 41, or a Section 395(1) certificate providing formal AO approval. In the post-Tiger Global environment, where the evidentiary standard for treaty entitlement has risen, the certificate route offers materially stronger protection for transactions where entitlement is not entirely straightforward.

Where the applicable DTAA provides a lower withholding rate than the domestic default, the non-resident recipient has two routes to that rate. The standard route is direct application of the treaty rate by the payer, on the basis of a valid Tax Residency Certificate and Form 41 declaration filed by the recipient on the Indian income tax portal. No AO involvement is required. For straightforward, low-controversy claims — a clearly established treaty rate, a clean TRC, no substance question — this is adequate and the faster approach.

Where the recipient’s treaty eligibility may attract scrutiny, where the income quantum makes payer-side default risk commercially significant, or where the transaction is one where Revenue is likely to examine the underlying entitlement, a Section 395(1) certificate from the AO provides materially stronger protection. The payer is bound by the certificate and is protected against default proceedings for deducting at the certified rate. The AO’s formal approval of the rate also makes it harder for Revenue to reopen the treaty entitlement question in a subsequent assessment. In the post-Tiger Global environment, where the evidentiary standard for treaty entitlement has risen and an AO examining a certificate application will look beyond the TRC to the substance behind it, the certificate route is the more defensible position for transactions where entitlement is not entirely straightforward.

Where the recipient’s total income in India is below the taxable threshold after applicable deductions, a nil deduction certificate under Section 395(1) is the appropriate route regardless of treaty position.

We advise on which route is appropriate for the specific transaction, prepare the income computation and treaty analysis supporting a Section 395(1) application, represent the recipient before the AO through the certificate process, and where the AO denies or imposes an adverse rate, assess whether MAP engagement through the recipient’s home jurisdiction competent authority is warranted.

Recipient-side: treaty documentation and rate alignment

Under Section 159(8) of the Income Tax Act 2025, a non-resident cannot claim DTAA benefits unless two conditions are simultaneously satisfied: a valid Tax Residency Certificate from the home jurisdiction tax authority, and the prescribed information filed in Form 41 on the Indian income tax portal. TRC alone is not sufficient. Without Form 41, treaty benefits can be denied at the withholding stage and the payer is required to deduct at domestic rates.

Where the direct treaty rate route is appropriate, the documentation position must be complete before the first payment is made. Under Section 159(8) of the 2025 Act, a non-resident cannot claim DTAA benefits unless two conditions are simultaneously satisfied: a valid Tax Residency Certificate from the home jurisdiction tax authority, and the prescribed information filed in Form 41 on the Indian income tax portal. TRC alone is not sufficient. Without Form 41, treaty benefits can be denied at the withholding stage and the payer is required to deduct at domestic rates.

Beyond TRC and Form 41, standard practice requires a no-PE declaration where the recipient claims treaty rates on fees for technical services, royalties, or business profits on the basis of no permanent establishment in India, and a beneficial ownership declaration where the applicable treaty article makes beneficial ownership a condition of entitlement. Post-Tiger Global, these declarations carry more weight than before — the AO will look at whether the substance behind them is genuine, not merely whether the forms have been filed.

We review TRC particulars for adequacy under Indian requirements, prepare or review Form 41 for completeness, advise on no-PE and beneficial ownership declarations, and identify gaps in the documentation position that could be exposed in assessment or at the certificate stage.

Payer-side: determining the taxable proportion of a composite payment

Where a cross-border payment bundles taxable and non-taxable elements, a payer who self-assesses a non-taxability position without a Section 395(2) AO determination takes a material risk. If Revenue later takes a different view, the payer faces recovery of the shortfall as their own liability under Section 398, interest from the date of deductibility, and disallowance of the full taxable portion under Section 35(b) in the year of default.

Where a cross-border payment bundles taxable and non-taxable elements — a service fee that includes cost reimbursements with no income character, a composite contract where only a portion gives rise to Indian-source income, or a payment whose characterisation is genuinely in dispute — the payer may apply under Section 395(2) for an AO determination of the appropriate proportion chargeable to tax. TDS under Section 393(2) then applies only to that proportion. A self-assessed non-taxability position on such a payment without the protection of a Section 395(2) determination is a default risk: if Revenue subsequently takes a different view, the payer faces recovery of the tax shortfall as their own liability under Section 398 of the 2025 Act, interest from the date of deductibility, and disallowance of the full taxable portion of the payment in their hands under Section 35(b) of the 2025 Act — the successor to Section 40(a)(i) of the 1961 Act — in the year of default, with the deduction available only in the year the tax is subsequently paid.

We advise on the taxability analysis for composite payments, assess whether a Section 395(2) application is the appropriate route or whether the transaction warrants a nil-deduction position supported by legal opinion, and prepare and file the application with the supporting legal and commercial analysis.

Payer-side: remittance compliance and Form 145/146

Every cross-border remittance to a non-resident must be reported in Form 145 before payment. Where the remittance exceeds Rs. 5 lakhs and is taxable, either an AO certificate under Section 395 filed as Part B of Form 145, or a Chartered Accountant certificate in Form 146 filed as Part C, is required. Where a Section 395 certificate is in place, the Form 146 requirement falls away. We advise on remittance reporting obligations, review Form 145 categorisation, and coordinate documentation to ensure remittance compliance is complete before the payment is made.

Payer-side: Section 398 default proceedings and representation

Where a payer has not deducted, or has deducted less than required, and Revenue initiates proceedings under Section 398 of the 2025 Act — the successor to Section 201 of the 1961 Act — we represent the payer before the AO in those proceedings. Where the rate applied was based on a treaty position or a taxability view that is defensible, representation at the default stage is materially different from simple tax recovery and requires engagement on the underlying legal position. We also advise on the interest exposure under Section 398, the disallowance consequences under Section 35(b) of the 2025 Act, and where appropriate, the grounds on which a penalty under Section 448 of the 2025 Act — the successor to Section 271C of the 1961 Act — may be contested.

Representation before the Income Tax Appellate Tribunal

Where a withholding tax dispute proceeds to appeal — whether arising from a final assessment order passed after DRP directions under Section 144C of the 1961 Act (Section 275 of the 2025 Act), or from a Section 398 default order — we represent payers and non-resident recipients directly before the ITAT. Grounds of challenge in this jurisdiction commonly include the correct rate under an applicable DTAA, the taxability of the payment in India, income characterisation, and treaty entitlement where the AO or DRP has taken an adverse position. Where the treaty entitlement question raises one of the open issues left by Tiger Global — the Section 90(2A) textual question, a genuine substance distinction, or a treaty with a comprehensive PPT or LOB clause that the lower authorities did not properly engage with — the appellate stage is where those arguments are most precisely available. We ensure continuity of the legal position from the advisory or certificate stage through to contested proceedings, so that the argument before the Tribunal is built on and consistent with the record below rather than constructed independently of it.

Who We Advise

R & D Law Chambers advises non-resident recipients of India-source income — foreign companies, funds, and individuals — where over-withholding relative to their true Indian tax liability can be prevented or remedied. We act equally for Indian payers facing treaty rate or taxability questions on cross-border payments, default proceedings under Section 398, and contested ITAT appeals on withholding tax grounds.

We advise non-resident recipients of India-source income — foreign companies, funds, and individuals — where the withholding rate applied or likely to be applied exceeds their actual Indian tax liability, whether by reason of an applicable treaty rate, deductions, or genuine non-taxability of the payment. We are equally engaged by Indian payers — subsidiaries of foreign groups, domestic companies with recurring cross-border payment obligations, and banks and financial institutions — where the taxable character of a composite payment is uncertain, where a prior position on rate or taxability is under challenge, or where a default proceeding has been initiated.

Where the withholding tax question intersects with treaty entitlement, income characterisation, or substance — the territory that Tiger Global brought into sharp focus — we are particularly useful. These are situations where a certificate application is not merely procedural and where the documentation, legal, and if necessary bilateral engagement must be coordinated from the outset rather than addressed in sequence as the dispute develops.

We also advise international law firms and advisory practices seeking India counsel on withholding tax questions arising in the context of cross-border transactions, restructurings, or fund exits where the Indian withholding position is one component of a larger multi-jurisdictional analysis.

How We Engage

Mandates typically arise at four points: a pre-transaction rate analysis before contracts are signed; a certificate application where the default rate is unacceptable or treaty entitlement requires AO-backed cover; a post-denial or default-proceedings instruction; or direct ITAT instruction, often via international referral. Early engagement is materially better than late engagement in the first three situations.

Mandates in this area typically begin in one of four ways.

A pre-transaction rate analysis, where a payment is being structured and the applicable withholding position needs to be established before contracts are signed. A certificate application, where a payment is imminent or recurring and the default rate is unacceptable or the treaty entitlement position requires AO-backed formal cover. A post-denial or default-proceedings instruction, where Revenue has taken an adverse position at the certificate stage or initiated Section 398 proceedings and representation is required. And direct appellate instruction, where a payer or non-resident recipient arrives at the ITAT stage — often via international referral — without prior engagement at the transaction or certificate stage, and requires counsel to argue the withholding rate, taxability, or treaty entitlement ground before the Tribunal.

Early engagement is materially better than late engagement in the first three situations. The documentation position that supports a certificate application, the taxability analysis that protects a payer, and the substance record that answers a treaty entitlement challenge are all significantly harder to build after a payment has been made or a proceeding has commenced than before. At the appellate stage, the constraint is different — the record below is fixed, and the task is to identify and argue precisely what the lower authorities did not engage with or decided incorrectly.

If you are evaluating the withholding tax position on a cross-border payment or structure, have received an adverse rate or denial, or require representation at any stage of a dispute, contact us at ravish@rdlawchambers.com or +91 98985 50411.

Related Services

Withholding tax questions rarely arise in isolation. A certificate denial frequently signals a broader treaty entitlement dispute requiring MAP engagement. Where the payment involves associated enterprises, transfer pricing documentation and an APA address the pricing and characterisation questions that the withholding position depends on.

Withholding tax questions rarely arise in isolation. Where a certificate denial or adverse rate signals a broader treaty entitlement dispute, Mutual Agreement Procedure engagement through the non-resident’s home jurisdiction competent authority is frequently the appropriate parallel response — for our MAP advisory, see rdlawchambers.com/our-services.
Where the payment in question is a management fee, royalty, or financing arrangement between associated enterprises, transfer pricing documentation and an Advance Pricing Agreement address the pricing and characterisation questions that the withholding tax position depends on — for our APA and transfer pricing advisory, see rdlawchambers.com/our-services.
Where excess tax has been withheld and a refund is sought through the Indian return filing process, or where foreign tax credit is to be claimed in the non-resident’s home jurisdiction for Indian tax withheld, we advise on that process as part of the broader cross-border tax position.

Frequently Asked Questions

What is the difference between a Section 395(1) application and directly applying the treaty rate using a TRC and Form 41?

Both routes can achieve the same withholding rate outcome, but they offer different levels of protection. Where a non-resident furnishes a valid Tax Residency Certificate and Form 41 to the Indian payer, the payer may apply the treaty rate without AO involvement. This is adequate for straightforward, low-controversy claims. A Section 395(1) certificate provides formal AO approval of the rate, which binds the payer and protects against default proceedings if Revenue later disputes the entitlement. Where the recipient’s treaty eligibility may attract scrutiny, or where the income quantum makes payer-side default risk commercially significant, the certificate route is the more defensible position.

What is the difference between a Section 395(1) and a Section 395(2) application?

They address different problems and are available to different parties. Section 395(1) is the recipient’s tool — it asks whether the recipient’s total India income justifies a lower or nil deduction rate. Section 395(2) is the payer’s tool — it asks what proportion of a specific composite payment is actually chargeable to tax in India. A payer uncertain about the taxable character of a payment uses Section 395(2) to obtain an AO determination of the taxable proportion. A recipient whose actual tax liability is lower than the default withholding rate uses Section 395(1) to obtain a certificate calibrated to that liability. In principle both can be engaged for the same payment where the taxable proportion and the applicable rate are both in question.

When should a Section 395(1) application be filed?

Before the first payment is made or credited, whichever is earlier. The obligation to deduct arises at the point of credit or payment, not at the point of remittance. An application filed after deduction at the default rate has occurred does not undo that deduction — the recipient must then seek a refund through the return filing process, which typically takes twelve to twenty-four months. Filing before the first payment is the only way to prevent over-deduction from occurring.

What happens if an AO denies a nil or lower deduction certificate?

A denial is not the end of the road but it requires immediate action in two directions. First, the denial should be examined for its grounds — whether express or implied from the rate applied — to determine whether it discloses Revenue’s position on treaty entitlement, income characterisation, or taxability. Second, where the denial results or will result in taxation not in accordance with the applicable DTAA, the non-resident should evaluate initiating MAP through their home jurisdiction competent authority under the MAP article of the relevant treaty. The denial stage is the earliest point at which bilateral engagement becomes available, and waiting for a formal assessment before initiating MAP evaluation narrows the available options significantly.

What changed after Tiger Global for withholding tax certificate applications?

The Supreme Court’s judgment of 15 January 2026 confirmed that a Tax Residency Certificate is necessary but no longer sufficient to establish treaty entitlement. The evidentiary standard now demands contemporaneous documentation of genuine commercial substance — functional reality in the treaty jurisdiction, genuine independent decision-making, and a structure whose primary rationale is not the elimination of Indian tax. An AO examining a Section 395(1) application will look beyond the TRC and Form 41 to the substance behind them. Documentation that was adequate before the judgment may not withstand scrutiny now. For a detailed analysis of what Tiger Global decided and what remains live, see our published analysis in International Tax Review.

What are the consequences for a payer who fails to deduct or under-deducts?

A payer who fails to deduct, or deducts less than required, is treated as an assessee in default under Section 398 of the Income Tax Act 2025 — the successor to Section 201 of the 1961 Act. The tax shortfall is recoverable from the payer as their own liability. Interest accrues from the date on which deduction was required. The payment is disallowed in the payer’s hands under Section 35(b) of the 2025 Act — the successor to Section 40(a)(i) of the 1961 Act — for the year of default; the deduction is available in the year in which the tax is subsequently deducted and paid. A penalty for non-deduction may additionally be levied under Section 448 of the 2025 Act, the successor to Section 271C of the 1961 Act. These consequences apply even where the non-deduction was based on a genuinely held taxability or treaty rate position, unless that position is ultimately sustained.

Is a TRC alone sufficient to claim treaty benefits under the 2025 Act?

No. Under Section 159(8) of the Income Tax Act 2025, a non-resident must satisfy two conditions simultaneously: a valid Tax Residency Certificate from the home jurisdiction tax authority, and the prescribed information filed in Form 41 on the Indian income tax portal. Without Form 41, treaty benefits can be denied at the withholding stage and the payer is required to deduct at domestic rates. In addition, a no-PE declaration and beneficial ownership declaration are standard requirements in practice where fees for technical services, royalties, or business profits are being claimed at treaty rates. Post-Tiger Global, these documents establish the threshold entitlement but the substance behind them is what an AO will scrutinise in a contested application.

Can MAP and domestic proceedings run simultaneously?

Yes. Initiating MAP through the non-resident’s home jurisdiction competent authority does not require withdrawal of domestic proceedings, and domestic proceedings do not prevent MAP from being pursued. The CBDT MAP Guidance of 7 August 2020 confirms that both can proceed simultaneously. If the ITAT decides a matter on merits while MAP is pending, India’s competent authority will respect that decision and request the treaty partner’s CA to provide correlative relief where applicable. MAP is most valuable where genuine distinctions from Revenue’s position exist — a treaty with a comprehensive PPT or LOB clause that the assessee genuinely satisfies, a materially stronger substance profile than the case Revenue is relying on, or correlative relief where double taxation has arisen from a unilateral Indian adjustment.

This page is for informational purposes only and does not constitute legal or tax advice. The provisions referenced reflect the Income Tax Act 2025 and Income Tax Rules 2026, in force from 1 April 2026, and the Income Tax Act 1961 and Income Tax Rules 1962 for periods prior to that date. Both are subject to legislative amendment. Readers should seek professional advice in respect of their specific circumstances.

Withholding Tax on Non-Resident Payments in India: Treaty Entitlement, Rate Determination, and Lower Deduction Certificates