When an Indian business needs to pay an overseas supplier, consultant or software provider, it must check whether the payment has tax implications in India before sending the money. A CA in Gurgaon can help assess the payment, identify applicable tax obligations and determine which documents need to be completed.
When Does a Business Need to Check Tax Rules for Foreign Payments?
Indian businesses make international payments for many reasons, including purchasing goods, paying overseas consultants, subscribing to foreign software and hiring international marketing agencies.
The tax treatment depends on what the business is paying for. A payment for imported goods may be treated differently from a payment for technical services, royalties or consultancy.
Before initiating a transfer, collect the vendor's invoice, contract or purchase order. Confirm the recipient's details, the payment amount and the purpose of the transaction. These details help establish the appropriate tax treatment.
Do You Need to Deduct TDS on Payments to Foreign Vendors?
Not every payment to an overseas vendor requires tax deduction at source (TDS). The answer depends on whether the income is taxable in India under the applicable provisions, along with any relevant Double Taxation Avoidance Agreement (DTAA).
For example, a payment for consultancy services may require a different analysis from a payment for physical goods. The vendor's country of residence and the terms of the arrangement may also affect the outcome.
Before making a payment, check:
- What is the payment for?
- Is the income taxable in India?
- Does a relevant tax treaty affect the treatment?
- Is TDS required, and what rate applies?
- Are supporting documents needed to establish the tax treatment?
Don't assume that the vendor's invoice alone settles these questions. A CA in Gurgaon can help review the transaction and determine whether tax must be deducted before the payment is made.
What Are Forms 145 and 146?
From 1 April 2026, Forms 145 and 146 apply to the relevant foreign payments covered by the Income-tax Act, 2025. They replace the earlier Forms 15CA and 15CB.
Form 145: Information about the payment
The person making the payment uses Form 145 to report information about the foreign payment and its tax treatment. The form must generally be submitted before the payment is remitted, where required.
Form 145 has four parts:
- Part A: For taxable remittances where the payment, or aggregate of relevant payments during the tax year, does not exceed ₹5 lakh
- Part B: For taxable remittances exceeding ₹5 lakh where an order or certificate has been obtained from the Assessing Officer
- Part C: For taxable remittances exceeding ₹5 lakh where an accountant's certificate in Form 146 has been obtained
- Part D: For specified payments that are not chargeable to tax, subject to the applicable rules and exceptions
Form 146: Certificate from an accountant
Form 146 is the accountant's certificate corresponding to the earlier Form 15CB. Where the applicable requirements call for it, a chartered accountant reviews the transaction and certifies relevant details, including its tax treatment and applicable TDS.
Form 146 is not required for every international payment. Whether it applies depends on the taxability of the payment, the amount involved and the relevant procedural requirements.
How Should You Prepare Before Making an International Payment?
Use this practical checklist before instructing your bank to transfer the money.
1. Collect the documents
Keep the vendor invoice, contract or purchase order, recipient details and a clear description of the payment. Depending on the transaction, tax residency documents or other supporting records may also be required.
2. Establish the tax treatment
Determine whether the payment is taxable in India and whether TDS applies. Consider relevant treaty provisions where appropriate.
3. Check which forms apply
Identify the applicable part of Form 145 and whether Form 146 or an Assessing Officer's order or certificate is required. Don't automatically assume that both forms must be filed.
4. Complete the required formalities
Submit the applicable information and obtain any required certificate before the transfer. Coordinate with your bank about its documentation requirements, as these may depend on the transaction.
5. Keep proof of the transaction
Save the filed forms, acknowledgements, invoices, supporting documents and bank transfer confirmation. These records can help with accounting and future tax queries.
A CA in Gurgaon can help businesses work through these steps for international payments, particularly when payments involve technical services, royalties or other transactions requiring a closer tax review.
What Mistakes Should Businesses Avoid?
One common mistake is treating every overseas payment the same way. Payments for goods, software subscriptions and professional services can have different tax implications.
Businesses should also avoid:
- Assuming every foreign payment requires Form 146
- Overlooking TDS obligations because the vendor is based overseas
- Waiting until the transfer date to collect documents
- Using outdated instructions for Forms 15CA and 15CB
- Assuming the bank's approval confirms that all tax requirements have been met
Check the rules applicable on the payment date and complete the required steps before initiating the transfer. A CA in Gurgaon can help identify the correct procedure and reduce the risk of errors or delays.
Why Work With a Professional
As your business grows, knowing when to seek professional financial support can help you stay organised, manage compliance requirements and make more informed decisions. Working with experienced professionals can provide the support needed to handle changing financial responsibilities effectively.
At P.K. Lakhani & Co., we help businesses with:
✅ Audit and assurance services
✅ Accounting and bookkeeping
✅ GST registration and return filing
✅ Tax planning and compliance
✅ Payroll and statutory compliance
✅ Business advisory and financial consulting
Consult Our Experts Today
P.K. Lakhani & Co. 📍 302, JMD Galleria, Sohna Road, Sector 48, Gurugram, Haryana, India 📞 +91 9811115617 🌐 https://www.pklakhani.com/
Conclusion
Before paying a foreign vendor, establish what the payment is for, check its tax treatment and determine whether TDS and remittance documentation requirements apply.
Forms 145 and 146 are the current counterparts of Forms 15CA and 15CB under the framework effective from 1 April 2026. Understanding when each form is required helps businesses prepare the right documents and avoid unnecessary delays.
FAQs
Does every payment to a foreign vendor require TDS?
No. TDS depends on the nature of the payment, whether it is taxable in India and any relevant tax treaty provisions.
Are Forms 15CA and 15CB still the current forms?
For relevant payments made from 1 April 2026, Forms 145 and 146 replace Forms 15CA and 15CB under the new framework. The earlier forms remain relevant to qualifying payments under the previous framework.
Is Form 146 mandatory for every foreign payment?
No. Form 146 is required only when the applicable rules and circumstances call for an accountant's certificate.
What documents should I collect before paying a foreign vendor?
Start with the invoice, contract or purchase order, recipient details and payment purpose. Depending on the transaction, you may also need tax residency documents and other supporting records.
Should I submit Form 145 before making the payment?
Where the rules require Form 145, it must generally be submitted before the payment is remitted. Check the applicable requirements and exceptions for the specific transaction.
Why should a business consult a chartered accountant before paying a foreign vendor?
A chartered accountant can help assess taxability, TDS obligations, treaty considerations and the documentation required for the transaction.
Disclaimer: This article is intended for general informational purposes only and should not be considered tax or professional advice. Foreign payment requirements depend on the transaction and applicable law. Consult a qualified professional for guidance specific to your circumstances.
Published by: P.K. Lakhani & Co., Chartered Accountants
Tags: Foreign Vendor Payments, Form 145, Form 146, TDS Compliance, International Business Payments, Business Taxation, CA in Gurgaon