India’s New TDS Rule on Foreign Services: What Every Business Must Know in 2025

Introduction

Starting April 2025, the Indian government has expanded Tax Deducted at Source (TDS) rules under Section 195 to cover a wider range of foreign services. Indian businesses making payments to overseas vendors for services like cloud software, digital marketing, or online subscriptions must now deduct TDS at the time of payment. This change directly affects how businesses manage international expenses.

What’s New?

TDS is now applicable on common digital services paid to non-resident companies, including:

• Software subscriptions (e.g., Microsoft 365, Adobe, Canva)
• Cloud services (e.g., AWS, Google Cloud)
• Digital ad platforms (e.g., Google Ads, Meta/Facebook)

The standard TDS rate is 10%, subject to tax treaty benefits if applicable.

What Businesses Need to Do

• Deduct TDS before making payments to any foreign vendor.
• File Form 15CA/15CB for remittances, especially for larger payments.
• Check for Tax Residency Certificates (TRCs) if applying lower DTAA rates.