Paying a freelancer abroad? Check the tax before you wire

Run the checker first. Then work through the steps.

1. Read the contract. Are you paying for their own work, or for rights in something they own? Rights can be a royalty under section 9(6) (formerly Section 9(1)(vi)), which is a different test.
2. Check Indian law alone. Section 9(7) (formerly Section 9(1)(vii)) treats a managerial, technical or consultancy fee paid by an Indian business as Indian income, and section 9(11) says it doesn't matter that the work was done abroad. The exception is a service you use for a business you run outside India, or to earn income from a source outside India.
3. Then check the treaty. Under Article 15 of the India-US treaty, India can tax a US resident's professional fees only with a fixed base here or a stay of 90 days or more in the year, and Article 12(5)(e) keeps those fees out of fees for included services. Article 14 of the India-UAE treaty has the same shape with 183 days, and that treaty has no technical-fees article. Other treaties differ.
4. Get the papers before you rely on a treaty: the freelancer's tax residency certificate and Form 41 (formerly Form 10F), filed on the Indian portal. Without them the treaty benefit isn't available.
5. If the fee is taxable, deduct under section 393(2), Table serial 17, at the rates in force, before you pay. If the freelancer has no PAN, read the no-PAN page first.
6. File Form 145 (formerly Form 15CA) before every remittance and give the bank a copy. Part D is for a fee that isn't taxable. A taxable fee above ₹5 lakh in the tax year needs Part C with a CA's Form 146 (formerly Form 15CB), or Part B with an officer's certificate.
7. Missed the deduction? Section 35(b)(ii) (formerly Section 40(a)(i)) disallows the expense until the tax is deducted and paid, then allows it in the year it's paid.
8. GST is separate. A service from a supplier outside India to your business is under reverse charge, so you pay the IGST yourself. See the GST reverse charge page.

1. An agency, or a freelancer billing through their own company or LLC. That is tested under other treaty articles, not the freelancer one.
2. Trips to India. Days worked here, or a desk here, can bring the fee into Indian tax.
3. Developers and consultants. Whether the work is a profession or a technical service decides which article applies. A CA reads the contract.

Any of these: Depends. Talk to a CA before the next invoice.