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According to the Indian Taxation Code, every individual or organization is supposed to pay an amount as a tax on their earnings before the money is actually credited to their account. This form of tax is called TDS, or Tax Deducted at Source. With this methodology, the government is able to formulate earnings through the provisions of TDS. It is governed by the rules and regulations formulated by the Central Board of Direct Taxes (CBDT under the Income Tax Act of 1961.
The income can be regular or irregular, the tax will be deducted at source in both scenarios. TDS, as the name suggests, is applicable to multiple sources of income, salary, rent, commission, interest, etc. TDS is deducted by the payer, i.e., the person making the payment before the balance amount is given to the receiver.
A TDS return is a quarterly statement of the tax paid on the income during that particular quarter. The statement is submitted by the deductor to the Income Tax Department of India. The TDS return includes details like
The due dates for filing the TDS of the year are as follows:
| Quarter 1 | July 31 |
| Quarter 2 | October 31 |
| Quarter 3 | January 31 |
| Quarter 4 | May 31 |
Because the liability of paying TDS is upon the payer, the deductor needs to deduct TDS, file the returns and submit the supporting documents every quarter on time. The type of TDS form depends upon the nature of income for which the deductor is filing the return. There are 4 types of TDS return forms – 24Q, 26Q, 27Q and 27EQ.
Form 27Q is the statement of the return for the non-salary payments done to an NRI. The Indian buyer is required to submit the form 27Q at every quarter before the due date. As per the Financial Budget of 2016, on-Resident Indians who do not have a PAN number are not supposed to pay a higher rate of TDS. Form 27Q comprises of the details in regards to the payments made to a non-resident in that quarter by the payer.
Under Section 195, there are two parties involved in a TDS payment:
TDS returns under form 27Q do not include payments like dividends paid to NRI, salary, and interest income, as mentioned under sections 195LB/LC/LD.
TDS is deducted from the entire amount being paid. The final amount is increased because of the addition of education cess and surcharge. The rates at which TDS is levied corresponding to the reason for payment are as follows:
| Section | Payment Type | Rate of TDS |
|---|---|---|
| 194E | Payment made to Sports association or an NRI sportsman | 20% |
| 194LB | Payment made as to interest on the infrastructure debt fund | 5% |
| 194LC | Payment made as to interest by any Indian company or trust for the money borrowed in foreign currency as a loan or long-term bonds | 5% |
| 195 | Payment made on the investment made by a non-resident Indian citizen | 20% |
| Payment made to non-resident Indian citizen for investments on assets other than mentioned among the specified assets in the form of long-term capital | 10% | |
| Payment made to non-resident Indian citizen for unlisted shares and securities of a non-public company | 10% | |
| Payment made to non-resident Indian citizen which forms their income through long-term capital gains as mentioned under section 112A | 10% | |
| Payment made to non-resident Indian citizen which forms their income through short-term capital gains as mentioned under section 111A | 15% | |
| Any other payment made to non-resident Indian citizen which forms a part of their income as long-term capital gains. | 20% | |
| Payment made in the form of interest by the government of India or an Indian company on the amount borrowed as loan or debt | 20% | |
| Royalty paid to the non-resident Indian citizen by the Indian government or Indian company for the transfer of copyright or other such agreement. | 10% | |
| Fees paid for availing technical services by the Indian Government or Indian company | 10% | |
| Any other form of payment | 30% | |
| 196B | Payment made to an offshore fund | 10% |
| 196C | Payment to non-resident Indian citizen in the form of Indian Company’s Shares or foreign currency bonds | 10% |
| 196D | Payment made to foreign investors in the form of securities | 20% |
The exchange rate for TDS return is set by the RBI (Reserve Bank of India). The exchange rate of that day is considered on the day of deduction.
The details of the payer, payee, challan, and deduction are required to be filled in Form 27Q. The details are as given below:
If the PAN number of the NRI is not available, then the details such as TIN (Tax Identification Number), country of residence, permanent address, contact details, and email ID should be mentioned in Form 27Q.
| Quarter | Duration of Quarter | Due Date of Quarter |
|---|---|---|
| Quarter 1 | April 1 to June 30 | July 31 |
| Quarter 2 | July 1 to September 30 | October 31 |
| Quarter 3 | October 1 to December 31 | January 31 |
| Quarter 4 | January 1 to March 31 | May 31 |
Form 27Q consists of three main sections, which include the statistics of the voucher, payment details, and deduction details. Statistics of Voucher:
The statistics of the voucher, records all the transactions and categorizes them into correct transactions, adequate transactions, and incorrect transactions.
These transactions are considered correct and form a part of the form 27Q. These transactions as are called ‘Included’ for creating form 27Q.
The transactions mentioned below do not require a TDS deduction and, hence, will be excluded when generating the form.
Uncertain transactions are transactions which are not eligible for either included or excluded transactions. The transactions in which Masters and Transactions parts have insufficient information filled in are listed as uncertain transactions.
The deduction details section showcases the type of deduction under which all included transactions are categorized. They are classified as follows:
This section categorizes the tax deducted, deductible tax and assessable value in the above categories and mentions them in the form.
This section of the form contains all the details of TDS payments that are available in the records up to the most recent entry. It contains only those entries which are relevant to the present period of TDS return filing. Any other entries that are not of this period or those which are not TDS payment entries will not be mentioned here. This area will show the payments made against included and excluded transactions.
Form 27Q wasn't always necessary for NRIs. Budget 2016 introduced the requirement for NRIs to have a PAN (Permanent Account Number) to claim certain tax treaty (DTAA) benefits. If an NRI didn't have a PAN, they would face a higher TDS rate deducted under Form 27Q. This change aimed to streamline the TDS process and ensure proper tax is collected.
TDS needs to be deducted while the payment is made to an NRI. The particulars of the TDS subtracted, as well as the rate at which it is deducted, have to be stated in the sales deed made between the buyer and the NRI seller. As cited above, the TDS should be deducted by the buyer and is then deposited by a challan on or before the 7th of the next month. This deposit should also be made by the payer. After the deposition of TDS, the payer needs to fill Form 27Q and submit the TDS return before the due date of filing for that quarter.
You cannot directly fill out Form 27Q online. However, you can use a downloadable tool to prepare the form electronically and then submit it. Here's how to prepare Form 27Q for submission:
Once the return is filed, the taxpayer can check the status of the TDS return on the website of NSDL. For opening the return status, the taxpayer needs to enter PAN and the provisional receipt number or the token number on the website.
If the TDS is not deducted on time, then 1% interest needs to be paid by the taxpayer. This 1% interest is levied on a monthly basis or for the days spent between the due date of deduction and the actual date of deduction.
Similarly, if the TDS is not deposited, interest at the rate of 1.5% per month or part of the month spent between the actual date of deduction and the actual date of deposition is levied.
Under section 234E, late filing of form 27Q attracts a minimum penalty of Rs. 200/day until the date of filing and a maximum penalty of an amount equal to the TDS deducted.
Under section 271H, the non-filing of form 27Q attracts a penalty of minimum Rs. 10,000 and a maximum of Rs. 1,00,000.
Under section 271H, no penalty is levied if the following conditions are met:
An individual or the organization filing the TDS return with form 27Q can download and save the form for future use. It can be done from the official TIN website - https://www.tin-nsdl.com/.
On the website, go to the 'downloads tab' and choose quarterly returns. From there you will be directed to another page. From this page, select the form you want to download.
After the TDS returns are filed, the payer can issue the Form 16A or a TDS certificate to the non-resident. This TDS certificate needs to be delivered to the non-resident seller within 15 days from the last date of filing TDS returns for the respective quarter.
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Yes, the form for online and offline returns are the same.
Taxpayer need to login to the Traces site or visit TIN Facilitation Centers, which are managed by NSDL e-Gov.
No. of deductee records in e-TDS/TCS return Upload charges (exclusive of GST) * GST as applicable
Returns having up to 100 records? 42.37
Returns having 101 to 1000 records? 178.00
Returns having more than 1000 records? 578.50
All transactions liable for TDS will have a tax deduction at a higher rate of 20% if the Permanent Account Number (PAN) of the payees is not available.
It can be filed manually.
