When payment is made to NRI, the TDS rate can be either as per the Income Tax Act or as per DTAA agreement with the country in which NRI Resides. Hence it is also important to mention the same while filing e-TDS Return (Form 27Q).
Payer/ Deductor deducting TDS needs to select Applicability of TDS from the following two option:
- If TDS rate is as per Income Tax Act
- If TDS rate is as per DTAA
In most cases. TDS Rate will be as per Income Tax Act until specifically mentioned by the payee/ deductee to take it as per DTAA.