Tax was withheld in India above the amount due

A foreign company whose Indian customer deducted tax at the Act rate, or at the higher rate for a missing PAN, and the treaty rate or the final Indian tax is lower.

Last reviewed 26 October 2026Law as of 26 October 2026By Vipul Sharma, Founder · Reviewed by Preetesh Maloo, Chartered Accountant, NRI Tax Partner

When the deduction is more than the tax

It happens in three ordinary ways. The customer withheld at the Act rate because Form 41 and the tax residency certificate were not on file, and the treaty rate is lower. The customer withheld under the higher-rate rule because no PAN and no Rule 217 packet were given, and a lower rate was available. Or the customer withheld on the whole invoice where only part of it is chargeable.

Stopping the next invoice from being over-withheld is Form 41 or Form 128. This page is about tax that has already been deducted.

Compare the rate that was used with the treaty cap in the DTAA rate lookup only as a starting point. The lookup does not know your permanent establishment, the article, or what was actually deposited against your PAN.

The credit, the return, and PAN

The credit for tax deducted is section 390 of the Income-tax Act, 2025. The 1961 Act section was section 199. The credit belongs to the person whose income it is, which for this page is the foreign company, and it follows the deductor's statement.

The company claims that credit in its return of income for the year the tax was deducted. A return for income of the year through 31 March 2026 is still under the 1961 Act. A return for the tax year beginning 1 April 2026 is under the 2025 Act. This page does not name the return form. The site's form map does not carry an ITR renumbering, and a form number here would be a guess.

The credit is matched to a PAN. A foreign entity that needs one applies on Form 96. The Form 128 note is the place that requires a PAN for a lower-deduction certificate. The refund claim needs the same identifier so the deduction the customer reported can be found.

There is no estimator on this site that turns an invoice and a country into a refund figure for a foreign company. The inputs that change the figure are the rate actually deposited, the treaty article, whether a permanent establishment exists, and the company's other Indian income. Those are not things a single rate table knows.

What a written scope has to say

The work is a computation of the Indian income, a comparison with the tax deposited, the treaty documents (tax residency certificate and Form 41), and the return that claims the credit. Who prepares that working, who reviews it, and who signs or files the return is stated in the written scope for the engagement.

The Indian customer does not file this return. The customer's Form 145 and Form 146 recorded the remittance. The customer's TDS statement is what the credit is checked against. The refund, if there is one, is the company's.

Tools

Questions

The credit under section 390 is for the person whose income was taxed. That is the foreign company. A deductor's own claim for tax paid by mistake is a different form and a different set of conditions, and it is not the route described here.

If the refund depends on a treaty rate, the Form 41 note says the treaty benefit is not available without Form 41 and the tax residency certificate, and that where a return is filed the form is required for the treaty claim in the return to be processed.

Sources

Who does the work

Who prepares the working, who reviews it, and who signs or files it is stated in the written scope for that engagement.

Corrections

26 October 2026. No return-form number and no refund estimate. Credit described as section 390, formerly section 199.