Tax Deducted at Source (TDS) is a mechanism implemented by the Indian government to collect tax revenue at the source of income. Form 27Q is a quarterly return that must be filed by individuals or organizations responsible for deducting TDS on payments made to non-resident Indians (NRIs). This guide provides a detailed overview of the procedure for paying TDS under Form 27Q, ensuring compliance with tax regulations and avoiding penalties.
Understanding Form 27Q
Form 27Q is a statement of TDS return for non-salary payments made to NRIs. It is mandatory for Indian buyers to submit Form 27Q before the due date of each quarter. As per the 2016 Union Budget, NRIs without a Permanent Account Number (PAN) are subject to a higher TDS rate. Form 27Q captures details of payments made to NRIs during the quarter, facilitating accurate tax collection.
Parties Involved in TDS Payment
Two parties are involved in TDS payment under Section 195:
- Payer: The individual, organization, or Hindu Undivided Family (HUF) making the payment to the NRI and deducting TDS before transferring the funds.
- Payee: The individual receiving the income. Their residential status must align with Section 6 of the Income Tax Act.
Rates for Deducting TDS
TDS is deducted from the entire payment amount, including education cess and surcharge. The applicable TDS rates vary depending on the nature of payment:
| Section | Payment Type | Rate of TDS |
|---|---|---|
| 194E | Payment to sports association or NRI sportsman | 20% |
| 194LB | Interest on infrastructure debt fund | 5% |
| 194LC | Interest on foreign currency loans or long-term bonds by Indian companies or trusts | 5% |
| 195 | Investment by non-resident Indian citizen | 20% |
| Investment in assets other than specified assets in the form of long-term capital | 10% | |
| Unlisted shares and securities of a non-public company | 10% | |
| Long-term capital gains as per section 112A | 10% | |
| Short-term capital gains as per section 111A | 15% | |
| Any other income forming part of long-term capital gains | 20% | |
| Interest by the government of India or an Indian company on loans or debt | 20% | |
| Royalty paid to NRI by the Indian government or Indian company for transfer of copyright or similar agreement | 10% | |
| Fees paid for availing technical services by the Indian Government or Indian company | 10% | |
| Any other payment | 30% | |
| 196B | Payment to an offshore fund | 10% |
| 196C | Payment to NRI in the form of Indian Company’s Shares or foreign currency bonds | 10% |
| 196D | Payment to foreign investors in the form of securities | 20% |
Details Required for Form 27Q
Form 27Q requires the following details:
- Payer Information: Name, address, PAN, TAN, contact details, financial year, assessment year, original statement or receipt number of previously filed returns.
- Payee Information: Name, division branch for collection, complete address, contact number, PAN, telephone number, email ID.
- Challan Information: Serial number, TDS amount, surcharge amount, BSR Code, education cess amount, interest amount, total tax deposit, number of demand drafts or cheques, collection code, tax deposit date, method of TDS deposition.
- Deduction Details: Name of tax collector, PAN, amount paid to the payee, amount of TDS deducted.
Procedure for TDS Deduction Under Form 27Q
- Deduct TDS while making the payment to the NRI.
- Include details of TDS deducted and the rate in the sales deed between the buyer and the NRI seller.
- Deposit the TDS amount via challan on or before the 7th of the following month.
- File Form 27Q and submit the TDS return within 15 days of the quarter’s end.
Consequences of Late Filing
Late filing of Form 27Q attracts penalties under Section 234E:
- Rs. 200 per day until the date of filing, with a maximum penalty equal to the TDS deducted.
- Minimum penalty of Rs. 10,000 and maximum penalty of Rs. 1,00,000 under Section 271H.
Exemptions from Penalty
No penalty is levied under Section 271H if the following conditions are met:
- TDS is deposited with the government.
- Interest and fees for late filing are deposited.
- Return is filed within one year from the due date.
How to Download Form 27Q
Form 27Q can be downloaded from the official TIN website (https://www.tin-nsdl.com/). Navigate to the ‘downloads tab,’ select ‘quarterly returns,’ and choose the desired form.
TDS Certificate
After filing TDS returns, a Form 16A or TDS certificate must be issued to the non-resident within 15 days of the last date for filing TDS returns for the quarter.
Payment to Non-Resident| How to file TDS return – Form 27Q| New Process
FAQ
How to make payment under 27Q?
What is the utility for form 27Q?
Which types of payments are covered under form 27q?
Followings are types of payments covered under Form 27Q: There are two parties involved in TDS payment under Section 195 of the Income Tax Act – payer and payee. The payer is an individual, the organization, Hindu Undivided Family (HUF) responsible for deducting TDS before making payment to the NRI.
How to file Form 27q?
While filing the Form 27Q, following details about the payer, payee, challan and deduction are required. In case the is not available, additional details of the NRI such as TIN, Permanent Address, Country of residence, Email and Contact details need to be mentioned in the Form 27Q. TDS must be subtracted by the buyer from the payment made to NRI.
When should a NRI submit Form 27q?
The Indian citizen making payment to the NRI needs to submit Form 27Q at every quarter before the due date. TDS is applicable at the prescribed rate on different types of payments made to NRIs and foreigners. Followings are types of payments covered under Form 27Q:
What does form 27q cover?
Form 27Q covers a wide range of transactions, except for those involving dividend payments to NRIs, salary payments, and interest income as outlined under sections 195LB/LC/LD. As mentioned earlier, dividend payments to NRIs, salary payments, and certain interest income fall outside the purview of Form 27Q.