Tax Deducted at Source (TDS) is a taxation method wherein a specified percentage of tax is deducted from the income at the time of payment. Governed by the Income Tax Act, 1961, and monitored by the Central Board of Direct Taxes (CBDT), TDS applies to various income types, such as salaries, interest, rent, and commissions.
The responsibility for deducting TDS lies with the payer, who remits the deducted amount to the government before transferring the balance to the receiver. This system ensures steady tax inflow for the government and simplifies compliance for taxpayers.
What is Form 27Q?
Form 27Q is a quarterly TDS return form used to report TDS deductions for payments made to Non-Resident Indians (NRIs) that are not salary-based. It is mandatory to file this form if you’ve deducted TDS for payments made to NRIs during a financial quarter.
Key highlights of Form 27Q include:
- Applicable Payments: Non-salary payments such as interest, dividends, royalties, and technical service fees made to NRIs.
- Higher TDS for Non-PAN Holders: NRIs without a PAN must pay TDS at 20%.
- Submission Timeline: To be filed every quarter before the due date.
Parties Involved in TDS Payment
- Payer:
The individual or entity responsible for deducting and depositing TDS. - Payee:
The NRI receiving the payment. Their residential status is determined under Section 6 of the Income Tax Act.
Rates for TDS Deduction
The applicable TDS rates vary depending on the nature of the payment, as outlined below:
| Section | Payment Type | TDS Rate |
| 194E | Payment to sports associations or NRI sportsmen | 20% |
| 194LB | Interest on infrastructure debt funds | 5% |
| 194LC | Interest on foreign currency loans or bonds | 5% |
| 195 | Payments for investments and other specified incomes | 10%-30% |
| 196B-D | Payments for offshore funds, securities, or royalties | 10%-20% |
Additional charges like education cess and surcharge may apply.
Steps to Fill Form 27Q Online
Although Form 27Q cannot be directly filed online, it can be prepared electronically using the Return Preparation Utility (RPU) and submitted at a TIN Facilitation Centre.
Steps to Prepare Form 27Q:
- Download the RPU Tool: Available on the official TIN website.
- Input Required Data: Provide payer and payee details, tax challan specifics, and payment details.
- Validate the Form: Use the File Validation Utility (FVU) to check for errors.
- Submit the Form: File the validated form at a TIN Facilitation Centre.
- Track Filing Status: Check the status on the TIN website using your PAN and token number.
Penalties for Non-Compliance
- Late Filing: ₹200/day under Section 234E until filing, subject to a maximum of the TDS amount.
- Failure to Deduct or Deposit TDS:
- 1% interest per month for late deduction.
- 1.5% interest per month for delayed deposits.
- Non-Filing: Penalties between ₹10,000 and ₹1,00,000 under Section 271H, unless all dues are settled and filing occurs within a year of the due date.
Budget 2024 Updates
The Union Budget 2024 introduces significant revisions under the new tax regime:
- Standard Deduction Increase:
- For salaried employees: ₹50,000 → ₹75,000
- For pensioners: ₹15,000 → ₹25,000
- Revised Tax Slabs:
| Income Range (₹) | Tax Rate |
| 0–3 Lakh | Nil |
| 3–7 Lakh | 5% |
| 7–10 Lakh | 10% |
| 10–12 Lakh | 15% |
| 12–15 Lakh | 20% |
| Above 15 Lakh | 30% |
Impact: A salaried employee could save up to ₹17,500 under the new tax regime.
TDS Certificate
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.
Conclusion
TDS ensures tax compliance and steady government revenue. Form 27Q simplifies the process for reporting non-salary payments to NRIs while the Budget 2024 updates provide tax relief for salaried individuals and pensioners. Ensure timely filing of TDS returns to avoid penalties and maintain compliance.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.
