What is the TDS rate under Section 195 on payments to non-residents?

Standard rate is 20% plus surcharge plus 4% cess. DTAAs often provide lower rates (e.g., 10% for royalties under India-US DTAA). Non-resident must provide TRC and Form 10F to claim DTAA rates.

Does a buyer need TAN to buy property from an NRI?

Yes. Property purchases from NRI sellers require TDS under Section 195, not 194IA. The buyer must obtain TAN, deposit TDS by the 7th of next month, and file quarterly Form 27Q.

Can NRI seller reduce TDS deducted by buyer on property sale?

Yes. The NRI seller can apply for a lower TDS certificate under Section 197 from the Assessing Officer. The buyer deducts at the reduced rate specified in the certificate.

Form 27Q – TDS Return for Payments to Non-Residents | NDS Avla

Form 27Q – Quarterly TDS Return for Payments to Non-Residents & Foreign Companies

Form 27Q Filing, DTAA Benefit Claims & Section 195 TDS Compliance for Payments to Non-Residents

Form 27Q is the quarterly TDS return that must be filed by any deductor who has deducted TDS on payments made to non-residents and foreign companies. This includes TDS under Section 195 (other income payments to non-residents), Section 194E (sportsmen/entertainers), Section 194LB (infrastructure debt funds), Section 194LBA (business trust distributions), and other sections applicable to non-resident payees. Unlike payments to residents where TDS rates are fixed by the Act, payments to non-residents require analysis of the applicable DTAA (Double Taxation Avoidance Agreement) to determine the correct TDS rate — which is often lower than the domestic rate.

Form 27Q must be filed quarterly within the same deadlines as other TDS returns. A key difference from Form 26Q is that Form 27Q requires additional information including the country of the non-resident, the relevant DTAA article, and whether Form 15CA/CB was filed. A TAN (Tax Deduction Account Number) is mandatory for Form 27Q deductors. This service connects with NRI rent TDS compliance, NRI property seller TDS, and lower TDS certificate applications.

Payments Covered Under Form 27Q

Section	Payment Type	Standard TDS Rate
195	Interest, royalties, fees for technical services, capital gains, rent, other income	As per DTAA or 20%/30%
194E	Payments to non-resident sportsmen or sports associations	20% + surcharge + cess
194LB	Interest from infrastructure debt fund	5% + surcharge + cess
194LBA	Income from units of business trust (real estate investment trusts)	5% or 10%
194LC	Interest from Indian company under specified agreements	5% + surcharge + cess
194LD	Interest on government securities/rupee-denominated bonds	5% + surcharge + cess
194N	Cash withdrawals (non-resident persons with bank accounts)	2% or 5%

Our Form 27Q Services

Form 27Q Preparation & Filing

Quarterly preparation and filing of Form 27Q for all non-resident payments — with correct section coding, DTAA rate determination, country of residence details, and challan matching.

DTAA Rate Advisory

Analysis of applicable DTAA between India and the non-resident's country of residence to determine the correct reduced TDS rate — saving significant tax on interest, royalties, and fees for technical services.

Form 15CA/CB Coordination

Coordination with Form 15CA/CB filing (required before most non-resident remittances) to ensure Form 27Q deduction rates are consistent with CA-certified Form 15CB declarations.

Form 16A Issuance

Download and issuance of Form 16A TDS certificates to non-resident recipients — essential for NRIs to claim TDS credit in their Indian income tax returns and for foreign companies to prove Indian tax withheld.

NRI Property TDS (Section 195)

Special advisory for buyers purchasing property from NRI sellers — TDS computation under Section 195, TAN application, Form 27Q filing, and coordination with NRI seller's lower TDS certificate.

Correction Returns

Filing of correction statements for Form 27Q to fix errors in deductee details, challan data, DTAA section references, or country codes — through the TRACES correction mechanism.

Frequently Asked Questions

What is the TDS rate on payments to non-residents under Section 195?

Under Section 195, TDS is deducted on payments to non-residents at the rates in force — which includes surcharge and health & education cess. For most payments (interest, fees for technical services, royalties) the standard rate is 20% plus applicable surcharge plus 4% cess. However, India's DTAAs with various countries often provide lower rates (e.g., 10% for royalties under the India-US DTAA, 10% for interest under the India-Mauritius DTAA). The non-resident must provide a valid Tax Residency Certificate (TRC) and Form 10F to claim DTAA rates.

Is Form 15CA/CB required for all payments reported in Form 27Q?

Not for all payments, but for most. Rule 37BB of the Income Tax Rules specifies that Form 15CA (taxpayer declaration) and Form 15CB (CA certificate) are required before remitting most payments to non-residents. However, specific payments listed in Schedule III of Rule 37BB are exempt from these requirements (e.g., repayment of loans by ADB, UN salaries, Indian embassies abroad). For most common non-resident payments — rent, professional fees, interest, capital gains — Form 15CA/CB must be filed before the bank processes the remittance.

Does a buyer need a TAN to deduct TDS on purchase of property from an NRI?

Yes. When buying property from an NRI seller, TDS is deducted under Section 195 (not Section 194IA), which requires the buyer to obtain a TAN (Tax Deduction Account Number) before deducting and depositing TDS. This is unlike purchases from resident sellers under Section 194IA where only the buyer's PAN suffices. The buyer must deposit TDS by the 7th of the following month (using challan ITNS 281) and file quarterly Form 27Q. Failure to obtain TAN for this purpose results in defaults under Section 201.

Can the NRI seller apply to reduce TDS deducted by the buyer on property sale?

Yes. An NRI seller can apply for a lower or nil TDS certificate under Section 197 from their jurisdictional Assessing Officer in India. The certificate specifies the rate at which TDS should be deducted by the buyer — which may be much lower than 20%/30% if the actual capital gain after indexation and exemptions (Sections 54, 54EC, 54F) is small or nil. The buyer must receive and verify this certificate before deducting at the lower rate. Without such a certificate, the buyer must deduct at the full applicable rate to avoid Section 201 defaults.

Making Payments to Non-Residents? Ensure Form 27Q Compliance.

Our team handles Form 27Q filing, DTAA rate optimization, Form 15CA/CB coordination, Form 16A issuance, and NRI property buyer TDS compliance — end to end.

F.A.Q.

What is annual compliance for a group gratuity trust?

It includes all yearly requirements such as filings, actuarial valuation, audits, and maintaining proper records.

Is annual compliance mandatory for gratuity trusts?

Yes, regular compliance is required to maintain approval and tax benefits.

What is the role of actuarial valuation in compliance?

It helps determine the exact gratuity liability and required funding for the trust.

Are annual returns required to be filed?

Yes, trusts must file necessary returns and maintain financial records as per regulations.

What happens if compliance is not maintained?

Non-compliance can lead to penalties, loss of tax benefits, or cancellation of approval.

Who is responsible for compliance of the trust?

Trustees and the employer are responsible for ensuring proper compliance.