Form 27Q: TDS Return on Payments to NRIs

Under Indian tax laws, individuals and entities are required to pay tax on certain payments before the money is credited to the recipient. This tax is known as TDS (Tax Deducted at Source). TDS allows the government to collect taxes at the source of income and is regulated by the Central Board of Direct Taxes (CBDT) under the Income Tax Act, 1961.

TDS applies to various types of income, whether regular or irregular, such as salary, rent, commission, interest, or other specified payments. The payer, or the person making the payment, is responsible for deducting TDS before transferring the remaining amount to the recipient.

What is a TDS Return?

A TDS return is a quarterly statement submitted by the deductor to the Income Tax Department, reporting the tax deducted during that period. The return typically contains:

• PAN & TAN of both the payer and the payee
• TDS challan details
• Information on the amount of TDS deducted and deposited

Form 27Q Explained

Form 27Q is used for reporting non-salary payments made to Non-Resident Indians (NRIs). Every payer in India is required to submit Form 27Q quarterly, within the prescribed due dates. NRIs without a PAN are subject to a higher TDS rate of 20%. The form captures all payments made to NRIs during the quarter by the deductor.

Parties Involved in Form 27Q TDS

Payer: The individual, organization, HUF, or entity making the payment. The payer is responsible for deducting TDS before transferring funds to the NRI.
Payee: The recipient of the payment, whose residential status is determined under Section 6 of the Income Tax Act.

Note: Form 27Q does not cover salary payments, dividends, or certain interest income specified under sections 195LB/LC/LD.

TDS Rates for Payments to NRIs

TDS is deducted on the total payment amount, including any applicable education cess and surcharge. The applicable rates depend on the nature of payment:

Section	Payment Type	TDS Rate
194E	Payments to NRI sportsmen or sports associations	20%
194LB	Interest on infrastructure debt fund	5%
194LC	Interest by Indian companies/trusts on foreign loans or long-term bonds	5%
195	Investments made by NRIs	20%
195	Investments in assets other than specified long-term assets	10%
195	Payments for unlisted shares/securities of non-public companies	10%
195	Long-term capital gains under Section 112A	10%
195	Short-term capital gains under Section 111A	15%
195	Other long-term capital gains	20%
195	Government or Indian company interest on loans/debts	20%
195	Royalties for copyrights/agreements	10%
195	Fees for technical services	10%
195	Other payments	30%
196B	Payments to offshore funds	10%
196C	Payments in the form of Indian company shares or foreign currency bonds	10%
196D	Payments to foreign investors in securities	20%

Exchange Rate: For TDS purposes, the RBI exchange rate on the date of deduction is used to convert foreign currency payments into INR.

 

NRIs Can Apply for Lower or Nil TDS

Non-Resident Indians (NRIs) earning income in India that is subject to TDS under Section 195 can apply for a reduced TDS rate or complete exemption. To avail this benefit, an NRI must submit Form 13 to the relevant assessing officer, who can issue a certificate for lower or nil deduction of TDS. This helps NRIs reduce the upfront tax deduction on their Indian income.

Details Required in Form 27Q

Form 27Q captures detailed information about the payer, payee, challan, and deductions. The required details are as follows:

1. Payer Details

• Name of the payer
• Address
• PAN number
• TAN number
• Contact information
• Financial year and assessment year
• Original statement or receipt number of any previously filed return in the same quarter

2. Payee Details

• Name of the payee
• Branch or division handling the collection
• Complete address
• Contact number
• PAN number
• Telephone number
• Email ID

3. Challan Details

• Challan serial number
• TDS amount
• Surcharge amount
• BSR code
• Education cess amount
• Interest amount (if applicable)
• Total tax deposited
• Number of demand drafts or cheques (if applicable)
• Collection code
• Tax deposit date
• Mode of TDS payment

4. Deduction Details

• Name of the tax collector
• PAN number
• Amount paid or credited to the payee
• TDS deducted

Note: If the NRI does not have a PAN, additional information must be provided, including TIN (Tax Identification Number), country of residence, permanent address, contact number, and email ID.

Form 27Q TDS Return: Due Dates

The due date for filing Form 27Q, which reports TDS on payments made to NRIs, is based on the quarter in which the payments were made:

Quarter	Duration	Due Date
Q1	April 1 – June 30	July 31
Q2	July 1 – September 30	October 31
Q3	October 1 – December 31	January 31
Q4	January 1 – March 31	May 31

 

Structure of Form 27Q

Form 27Q is divided into three key sections:

1. Statistics of Vouchers
   This section records all transactions and categorizes them as included, excluded, or uncertain.
   
   Included Transactions – These are considered correct and form part of Form 27Q:
   
   • Booking entries with or without TDS deduction
   • Entries of TDS deduction
   • Advance payments
   • TDS adjustment entries for government entities
   • TDS reversals
   • TDS deductions related to escalations or reductions
2. Excluded Transactions – Transactions that do not require TDS deduction:
   
   • Entries where TDS is not applicable
   • Voucher types such as inventory, contra, sales orders, payment vouchers, debit notes, credit notes, payroll, or optional vouchers
3. Uncertain Transactions – Transactions with insufficient information in the Masters or Transactions sections. These cannot be classified as included or excluded and are flagged as uncertain.

2. Deduction Details
   This section groups all included transactions according to the type of TDS deduction:
   
   • Deduction at normal rate
   • Deduction at higher rate
   • Lower rated taxable expense
   • Expenses under exemption limit
   • Zero-rated taxable expense
   • Except in cases where PAN is not available
3. It records the assessable value, tax deducted, and deductible tax for each category.

3. Payment Details
   This part lists all TDS payments relevant to the current quarter, reflecting only entries related to TDS payments in the period being reported. Payments outside the period or unrelated to TDS are excluded. It displays payments against both included and excluded transactions.

Procedure for TDS Deduction Under Form 27Q

TDS must be deducted at the time of making payments to a Non-Resident Indian (NRI). The details of the TDS deducted, including the rate, should be clearly mentioned in the sale deed or agreement between the buyer and the NRI seller.

The buyer is responsible for deducting the TDS and depositing it with the government through a challan on or before the 7th of the month following the payment. After depositing the TDS, the payer must file Form 27Q to submit the TDS return within the due date for the relevant quarter.

 

Steps to Prepare and Submit Form 27Q Online

Form 27Q cannot be filled directly on the NSDL or Income Tax portal. Instead, a downloadable utility is used to prepare the return electronically, which can then be submitted. Here’s the procedure:

1. Download the RPU (Return Preparation Utility):
   Obtain the e-TDS/TCS Return Preparation Utility (RPU) from the official TIN website: https://www.protean-tinpan.com/services/etds-etcs/etds-rpu.html.
2. Prepare Form 27Q in the RPU:
   Enter the required details including:
   
   • Payer details: Name, PAN, TAN, address, and contact information
   • Payee details: Name, PAN (or TIN if PAN unavailable), address, and contact
   • Challan details: TDS deposited, challan serial number, BSR code, education cess, and surcharge
   • Deduction details: Amount paid and TDS deducted
3. Validate the Form:
   Use the File Validation Utility (FVU) included with the RPU to check for any errors or discrepancies in the form.
4. Submit the Form:
   The validated Form 27Q (in the prescribed electronic format) should be submitted at a TIN Facilitation Center (TIN-FC) under NSDL e-Gov.
5. Check Return Status:
   After submission, the status of the filed TDS return can be tracked on the NSDL website. You’ll need the PAN and provisional receipt/token number to view the filing status.

Late Filing of TDS Returns with Form 27Q

TDS Deduction Delays

If TDS is not deducted on time, the taxpayer is liable to pay interest at 1% per month or for the actual number of days between the scheduled deduction date and the actual deduction date.

Similarly, if the deducted TDS is not deposited on time, interest is levied at 1.5% per month or part of a month for the period between the date of deduction and the date of actual deposit.

Consequences of Late Filing of Form 27Q

1. Late Fee under Section 234E:
   Filing Form 27Q after the due date attracts a late fee of Rs. 200 per day until the return is filed. However, the maximum penalty cannot exceed the TDS amount deducted.
2. Penalty under Section 271H:
   Non-filing of Form 27Q can result in a penalty ranging from Rs. 10,000 to Rs. 1,00,000.
3. Exemption from Penalty:
   No penalty is levied under Section 271H if all the following conditions are satisfied:
   
   • TDS has been deposited with the government.
   • Any applicable interest or late fees have been paid.
   • The return is filed within one year from the original due date.

How to Download Form 27Q

Individuals or organizations can download Form 27Q for filing or record-keeping from the official TIN website: https://www.tin-nsdl.com/

Steps to Download:

1. Visit the website and go to the Downloads tab.
2. Select Quarterly Returns.
3. You will be redirected to a page listing all relevant forms.
4. Choose Form 27Q, download it, and save it for future use.

TDS Certificate

Once the TDS return is filed, the payer is required to issue a TDS certificate (Form 16A) to the non-resident payee. This certificate serves as proof of the TDS deducted and deposited. It must be provided to the non-resident within 15 days from the due date of filing the TDS return for that particular quarter.