Does a treaty automatically eliminate TDS?

No. Treaty eligibility and the underlying tax position must be established.

Income Tax Act, 1961 | Appeals

Section 248: Appeal by a Person Denying Liability to Deduct Tax

Q: Can a payer appeal under Section 248 without paying the tax?

The payer must have paid the tax to the Central Government under the wording of Section 248.

Q: Does Section 248 cover interest paid to a non-resident?

No. Interest is expressly excluded from this appeal provision.

Section 248 of the Income-tax Act, 1961 provides a specific appeal remedy to a person who has borne and paid tax deducted at source (TDS) on certain payments to a non-resident but maintains that no tax was deductible. It is particularly relevant to cross-border contracts under which the Indian payer agrees to bear the recipient's income-tax liability.

Important legislative update: The Income-tax Act, 2025 came into effect on 1 April 2026, subject to its commencement and transitional provisions. Section 248 discussed here is the provision in the Income-tax Act, 1961. For current or pending cases, identify the applicable tax year and savings provisions before relying on the old section numbering.

Section 248: statutory text

Where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income.

The quoted wording is retained from the original webpage. It reflects the substituted provision effective from 1 June 2007. The words "other than interest" are an express limitation, and the statutory remedy requires the payer to have paid the disputed tax to the credit of the Central Government.

What does Section 248 mean?

Section 195 governs deduction of tax from certain payments to non-residents and foreign companies when the payment is chargeable to tax in India. In a net-of-tax or tax-borne-by-payer arrangement, the payer bears the withholding-tax cost rather than reducing the amount payable to the non-resident. Section 248 permits that payer to contest the existence of the deduction obligation after depositing the tax, where the statutory conditions are met.

Conditions for an appeal under Section 248

Payment covered by Section 195: the dispute must concern tax allegedly deductible on income payable under that provision.
Interest excluded: the appeal route in Section 248 expressly excludes interest income.
Contractual allocation: an agreement or other arrangement must place the tax burden on the person making the payment.
Tax deposited: the payer must have paid the relevant tax to the credit of the Central Government.
Dispute over deductibility: the payer must claim that no tax was required to be deducted on the income.
Appropriate appellate forum: the provision names the Commissioner (Appeals); the applicable procedural and transitional rules must also be considered.

Key legal definitions and related provisions

Section 195 - tax on payments to non-residents: The withholding provision dealing with specified sums chargeable under the Act paid to non-residents or foreign companies, subject to its wording and applicable treaty relief.
Tax deducted at source (TDS): Tax withheld by the payer from a payment, or borne by the payer where the contract requires a net payment, and remitted to the Government.
Grossing up - Section 195A: Where tax on income is borne by the payer under an agreement, Section 195A sets out the grossing-up principle, subject to statutory conditions. Grossing up and the separate right of appeal under Section 248 should not be confused.
Commissioner (Appeals): A statutory first appellate authority under the 1961 Act. Filing and disposal of appeals are governed by applicable appeal provisions and rules.
Double Taxation Avoidance Agreement (DTAA): A tax treaty that may affect whether income is taxable in India and at what rate, subject to domestic-law and treaty eligibility requirements.

Illustration: a net-of-tax service agreement

An Indian company contracts to pay a non-resident consultant a fixed amount without any reduction for Indian withholding tax. The company bears and deposits the tax on the payment, but later concludes that the income was not chargeable to tax in India under the applicable law and treaty. If the payment is not interest and the other statutory requirements are satisfied, Section 248 provides a route to seek a declaration that no tax was deductible. Whether the underlying tax position is correct depends on the actual contract, services, place of performance, treaty and facts.

Practical appeal preparation

Examine the agreement and confirm that the payer, rather than the recipient, contractually bears the tax.
Identify the precise payment, income classification, recipient's residence and the legal basis for asserting non-taxability.
Collect challans, TDS returns, withholding computations, invoices and correspondence proving payment of the disputed tax.
Review the relevant appeal rules, prescribed electronic filing process, limitation and fee requirements under the law applicable to the proceeding.
Present grounds showing why Section 195 did not require deduction, supported by domestic provisions, applicable DTAA articles and relevant evidence.

Under the 1961 Act, Section 249 addresses the form and limitation of appeals and Section 250 addresses appellate procedure. The standard online appeal mechanism commonly uses Form 35; the correct form, deadline and forum for a Section 248 matter should be checked against the governing rules and current portal instructions, rather than assumed.

Section 248 compared with other remedies

Section 195(2): a payer may seek determination of the appropriate proportion chargeable to tax before withholding in circumstances covered by that provision. Section 197: a certificate for deduction at a lower or nil rate may be available where statutory requirements are met. Section 201: deals with consequences of failure to deduct or pay tax; an appeal against an order under Section 201 is a different remedy. Section 248: concerns a payer who bears and has already deposited the tax and disputes that any deduction was required on the relevant non-interest income.

Legislative position and official resources

The original text of Section 248 was substituted with effect from 1 June 2007, as recorded in the source webpage. Since the enactment of the Income-tax Act, 2025, the operative provisions and transitional rules should be checked for cases arising from 1 April 2026 onward. Historical 1961 Act provisions remain important for matters to which that Act continues to apply under savings and transition arrangements.

For the official statutory text and current filing guidance, consult the Income Tax Department, the Income Tax e-Filing portal and India Code. These are external reference links within the article, not navigation-menu items.

Frequently asked questions

Can a payer appeal under Section 248 without paying the tax?

The text of Section 248 requires that the payer has paid the tax to the credit of the Central Government before claiming the declaration under that provision.

Does Section 248 cover interest paid to a non-resident?

No. The provision expressly excludes interest income from this particular appeal remedy.

Is Section 248 the same as an appeal against a Section 201 demand?

No. Section 248 concerns a payer who bears and pays tax but contends no deduction was required. A Section 201 order raises a different statutory question and appeal route.

Does a tax treaty automatically eliminate TDS?

No. Treaty entitlement, the character of the income, supporting documents and the applicable domestic provisions must be established in the particular case.

This article provides general statutory information. Confirm the relevant version of the legislation, assessment year, treaty and filing rules before taking action.