TDS Payment Code 1062 (Section 413): Non-Resident Payment Reconciliation Guide

Quick reference: Payment Code 1062 at a glance

What payment code 1062 covers

Payment code 1062 under Section 413 captures TDS on any payment to a non-resident or foreign entity that is chargeable to tax in India. Section 413 is the umbrella sub-section in the 2025 Act under parent Section 413, sitting outside the 393 family because cross-border TDS has structurally different mechanics (treaty rates, Form 15CA/CB workflow, no fixed Indian PAN for many deductees). The coverage is wide and varied:

• Royalty paid to a foreign rights-holder for use of intellectual property, software licences (where the licence conveys IP rights rather than mere use of a copy), patents, trademarks.
• Fees for technical services (FTS) paid to foreign consultants, foreign engineering firms, foreign software service providers, foreign cloud-hosting providers (treaty-dependent on whether the service is FTS under the applicable DTAA).
• Interest on foreign-currency loans, external commercial borrowings (ECB), interest paid to foreign group entities.
• Capital gains on transfer of Indian assets by non-residents (Section 9(1)(i) deemed-accrual scope).
• Dividends paid to non-resident shareholders (post-DDT abolition).
• Hospitality and OTA commissions paid to foreign online travel agencies on Indian hotel bookings — see TDS Section 413 hotel foreign OTA reconciliation for the booking-platform-specific patterns.

A worked example for FY 2026-27: An Indian SaaS company pays a UK-based engineering consultancy ₹15,00,000 for a six-month technical advisory engagement. Under the India-UK DTAA, fees for technical services are taxable at 10% on gross. The UK consultant furnishes a TRC and a Form 10F. The Indian company deducts 10% (₹1,50,000) at the time of remittance, prepares Form 15CB through a chartered accountant, files Form 15CA, and remits the net amount. The challan carries payment code 1062 under Section 413. The Form 27Q for Q2 FY 2026-27 (deadline October 31, 2026) shows the deduction with country-of-residence “UK”, income type “FTS”, treaty rate “10%”.

Rate, threshold, and applicability rules

The rate is treaty-driven. The deductor must:

1. Identify the income type (royalty, FTS, interest, dividend, capital gain, other business income).
2. Look up the relevant DTAA between India and the country of residence of the deductee.
3. Apply the lower of the treaty rate or the Act rate for that income type.
4. If no TRC or Form 10F is on file, treaty benefit is not available — Act rates apply.

Common treaty rates (illustrative — actual rates depend on the specific treaty and protocol amendments):

• Royalty / FTS: 10% (India-USA, India-Singapore), 15% (some older treaties), 25% (in absence of treaty, Act rate).
• Interest: 10% (most treaties), 15% (some specific structures), 20% (Act rate without treaty).
• Capital gains: depends on asset type — long-term listed equity exempt under some treaties; short-term taxed at Act rates.

There is no minimum-payment threshold under code 1062 — even a ₹50,000 cross-border payment for a software subscription, if chargeable to tax in India as royalty or FTS, attracts deduction.

The Form 15CA/15CB workflow operates in parallel: any cross-border remittance above ₹5,00,000 cumulative per FY to the same recipient requires Part C of Form 15CA along with a Form 15CB chartered accountant certificate. Below ₹5,00,000, Part D of Form 15CA suffices (self-declaration).

What payment code 1062 replaced (1961 Act → 2025 Act)

Section 195 under the 1961 Act has been the home of cross-border TDS since 1961, with successive amendments adding the Form 15CA/CB workflow (2009), the explicit TRC requirement (2012), and the most-favoured-nation clause clarifications across multiple CBDT circulars. The 2025 Act absorbs Section 195 into Section 413 without changing the treaty mechanics, the TRC requirement, or the Form 15CA/CB workflow.

Cross-era reconciliation is largely a one-time event for code 1062: cross-border invoices dated March 2026 remitted in April 2026 — the deduction date governs. If remitted in April under the 2025 Act, code 1062 applies; if remitted in March under the 1961 Act, Section 195 applies. The Section 393 TDS reconciliation framework covers cross-era matching at a framework level; note that Section 413 sits outside the Section 393 family but the dual-mode matching principle is identical.

Form 168 reconciliation for payment code 1062

Form 168 does not show code 1062 lines for non-resident deductees who lack an Indian PAN — they appear only in the deductor’s Form 27Q return. For Indian-resident recipients of payments structured as cross-border (rare — typically only where a resident receives via a foreign entity, an unusual structure), code 1062 lines do appear in Form 168.

From the deductor’s perspective, reconciliation joins the AP ledger to the Form 27Q return plus the challan register, with no Form 168 leg. The key columns to validate per line:

• Country of residence: must match the TRC and Form 10F on file.
• Income type: royalty, FTS, interest, etc. — must match the DTAA article applied.
• Treaty rate: must match the applicable DTAA table.
• TRC validity: TRCs are typically annual; an expired TRC invalidates treaty benefit and triggers Act rate.
• Form 15CA/15CB reference: must be attached for every above-threshold remittance.

Common reconciliation issues for payment code 1062

The recurring patterns on code 1062:

1. TRC and Form 10F lapses. Annual renewal cycle often missed; deductor applies treaty rate without valid TRC; Assessing Officer disallows treaty benefit on audit.
2. Royalty versus FTS classification. Different treaties carve the boundary differently; software-related payments are particularly contentious. The Engineering Analysis ruling (Supreme Court 2021) tightened the royalty definition for software licences — many earlier code-195 deductions on standard software licences may have been excess deductions.
3. Equalisation levy overlap. Digital advertising payments to foreign platforms (Google, Meta, LinkedIn) attract 6% equalisation levy, which is not TDS and does not flow through code 1062. E-commerce equalisation levy of 2% (now sunset for most cases) had similar parallel mechanics.
4. Beneficial ownership challenge. A payment to a Singapore intermediary may not qualify for India-Singapore treaty benefit if the intermediary is not the beneficial owner of the income.
5. Capital gains on Indian asset transfer. Section 9(1)(i) deemed accrual sweeps in indirect-transfer cases (sale of foreign shares deriving value from Indian assets); the TDS-by-purchaser obligation under code 1062 is easily overlooked in cross-border M&A.

For broader cross-border reconciliation patterns, see TDS reconciliation software and reconciliation software India.

For the full set of codes across Sections 392 / 393 / 394 / 413, see the TDS payment codes 1001–1092 master reference. Authoritative text and DTAA tables are on the Income Tax India e-filing portal, where the Income Tax Act 2025 enrolled text, DTAA tables, and CBDT notifications on payment code 1062 are published.