For resident professionals, Section 194J is the familiar rule: a flat 10% TDS on professional or technical fees once payments cross Rs 30,000 in a year. That section applies only to residents. Once the recipient is an NRI, Section 195 takes over instead -- the general TDS-on-payments-to-non-residents provision -- and the applicable rate is no longer a flat, low percentage.
How the rate is actually set
Under Section 195, TDS on professional or technical fees paid to a non-resident is generally deducted at 20% (plus applicable surcharge and cess) unless a lower rate is available under the India-US DTAA and properly claimed -- which typically means the payer has the recipient's TRC and Form 10F on file before payment, the same documentation chain used for NRO interest and property sale TDS.
Salary paid to an NRI director or employee for work performed in India follows a related but distinct path: if the individual is non-resident, the payer typically deducts under Section 195 rather than the resident salary provisions of Section 192, again generally at a higher effective rate than a comparable resident employee would see, before any treaty relief is factored in.
Why this trips people up
The confusion usually starts because the recipient assumes the familiar resident rates (10% for professional fees, standard slab-based withholding for salary) still apply. They don't, once residency status changes -- and the excess TDS is only recoverable by filing an Indian return and claiming the difference, or by the payer applying a valid DTAA rate with the right paperwork from the start. Confirming residency status with the payer before invoicing or accepting payment avoids the higher up-front withholding entirely.