TDS form 27q: Procedure, Due Dates and How to Fill It?

Did you know that tax is often deducted before your income reaches you?

Under India’s taxation system, individuals and organizations must pay tax on earnings before they are credited to their accounts. This tax form is called TDS (Tax Deducted at Source), which ensures timely tax collection from various types of income like salary, interest, commission, and more, helping the government manage revenues effectively.

One key form involved in this process is Form 27Q, which reports tax deductions for non-salaried payments like interest, rent, and commissions. This form is essential if you’re dealing with payments to non-residents or foreign companies.

• But when should it be filed? 
• What’s the procedure? 
• And how do you fill it out?

In this blog, we’ll walk you through everything you need to know about TDS Form 27Q – the procedure to fill it out, critical due dates, tips to avoid common mistakes, etc. So, let’s break it down, step-by-step, so you can easily file and avoid any tax-related hiccups!

27Q TDS Return Meaning

TDS Form 27Q is a return statement that reports non-salary payments made to Non-Resident Indians (NRIs). Indian buyers or entities making such payments must submit this form quarterly, before the due date. If the NRI does not hold a PAN card, TDS is deducted at a higher rate of 20%.

What is TDS Return?

A TDS return is a quarterly report submitted by the deductor (individual or organization deducting the tax) to the Income Tax Department, showing the tax paid on the income during that particular quarter. The return includes details like:

• the PAN and TAN numbers (both the employee and employer,)
• TDS challan info,
• the amount of TDS paid.

The Parties Involved in TDS Form 27Q

Under Section 195, there are two key parties involved in TDS payments to NRIs:

1. Payer: The payer is the individual, organization, or HUF (Hindu Undivided Family) responsible for paying the NRI and deducting TDS before transferring the amount.
2. Payee: The payee is the recipient of the income. Their residential status must align with Section 6 of the Income Tax Act.

Form 27Q does not cover payments like dividends, salary, and interest income under sections 195 LB/LC/LD.

Details Required in TDS Form 27Q

1. Payer Information:
   • PAN and TAN numbers
   • Contact details (email, phone, address)
   • Financial year and assessment year
   • Statement or receipt number from the return filed in the same quarter
2. Payee Information:
   • PAN, telephone number, email ID
   • Complete address and contact details
3. Challan Information:
   • TDS amount, BSR code, tax deposit date
   • Method of deposition, education cess amount, interest, total tax deposit
4. Deduction Information:
   • Amount of TDS deducted
   • Name of the tax collector, amount paid to the payee

If the NRI does not have a PAN, their TIN, country of residence, permanent address, and contact details should also be listed.

Classification of TDS Form 27Q

Form 27Q is organized into three key sections: Statistics of the Voucher, Payment Details, and Deduction Details, each serving a distinct purpose in categorizing and processing TDS-related transactions.

1. Statistics of the Voucher

This section focuses on classifying transaction records based on their accuracy:

• Included Transactions: These are deemed correct and require TDS deductions. It covers entries like booking entries (with or without TDS), TDS adjustments to government entities, advance payments, and TDS reversals.
• Excluded Transactions: These transactions are not subject to TDS deductions. They include inventory vouchers, Contra entries, payment vouchers, and other types like purchase/sales orders, debit/credit notes, payroll vouchers, etc.
• Uncertain Transactions: These transactions don’t fit into either category due to insufficient information in the Masters or Transactions sections.

2. Payment Details

This section contains all relevant TDS payments up to the latest entry in the filing period. Only those entries that pertain to the current return period are included. Transactions outside this period or not related to TDS payments are excluded.

By organizing the data into these categories, Form 27Q helps ensure accurate reporting of non-salary payments made to NRIs and maintains clear records for tax compliance.

Step-by-Step Procedure to File TDS Form 27Q 

According to Indian tax regulations, TDS (Tax Deducted at Source) must be deducted from payments made to Non-Resident Indians (NRIs). The sales agreement between the buyer and NRI seller should clearly state the details of the TDS deduction, including the rate at which it is applied.

The buyer is responsible for deducting the TDS and depositing it via a challan on or before the 7th of the following month. This deposit must be made by the payer (buyer), who is also responsible for completing Form 27Q. After depositing the TDS, the payer must submit the Form 27Q TDS return before the filing deadline for the relevant quarter.

Here’s a simple, step-by-step guide to filing Form 27Q:

Step 1: Download the TDS Utility

Visit the Protean website (formerly NSDL e-Gov), click the “Downloads” tab, and select e-TDS/e-TCS. Then, choose Quarterly Returns and click on “Regular.”

Step 2: Download RPU Utility

Next, select the e-TDS/e-TCS RPU tool from the list and download it.

Step 3: Open the RPU Tool

After downloading, extract the file from the Zip folder and open the RPU tool. To use this tool, you must have Java installed on your computer. For more details, refer to the user manual.

Step 4: Select Form 27Q

Open the RPU tool, select Form 27Q from the drop-down menu, and click “Continue.”

Step 5: Fill in Required Details

Enter the following information:

• Mention the financial year for which you’re filing.
• Specify whether you are a government or non-government deductor.
• Deductor Details: Enter the name, address, and other information of the entity deducting the tax.
• Particulars of the Person Responsible for Deduction: Fill in the name, address, and contact information.
• Tax Details: Input details of the tax deducted and paid to the Central Government, including challan number, deposit amount, and date.

Step 6: Save Details & Create the File

Once you’ve entered all the required information, click “Save” and “Create File.”

Step 7: Choose File Location

Select a location on your computer to save the created file. Once validated, your Form 27Q file will be ready.

Step 8: Verify and Submit

Finally, verify the downloaded file using FVU (File Validation Utility) software. After validation, upload the file to the Income Tax Department’s website.

TDS Certificate

After filing the TDS returns, the payer issues a TDS certificate to the non-resident. This certificate, typically Form 16A, serves as proof of tax deducted at source on the payments made to the non-resident.

The payer must provide this certificate to the non-resident seller within 15 days of the TDS return filing deadline for the relevant quarter. The certificate includes essential details like the amount of tax deducted, the challan number, and the period of tax deduction, ensuring that the non-resident can claim credit for the tax paid when filing their income tax returns.

Payments Covered under TDS Form 27Q

Every deductor making payments of a specific nature to Non-Resident Indians (NRIs) is required to deduct TDS at the prescribed rate. The following types of payments are covered under Form 27Q:

• Payments to non-resident sportsmen or sports associations
• Other sums payable to Non-Residents
• Income of Foreign Institutional Investors from securities
• Income from units held by Non-Residents
• Interest income on individual bonds and government securities
• Payments for units to an offshore fund
• Interest from infrastructure debt funds
• Income from foreign currency bonds or shares of Indian companies payable to Non-Residents
• Interest income from Indian companies engaged in specific businesses
• Accumulated balance of provident fund payable to the employee
• Income to unitholders from investment funds
• Income from investments in securitization trusts

Late filing of TDS returns with form 27Q

• Failing to Deduct TDS:

If TDS is not deducted on time, the taxpayer becomes liable to pay interest. The interest rate is 1% per month (or part of the month) on the amount that should have been deducted but wasn’t. If TDS is not deposited after deduction, the interest rate increases to 1.5% per month, calculated from the actual date of deduction until the date of deposit.

• Late Filing of Form 27Q:

As per Section 234E, if Form 27Q is filed late, the taxpayer is liable to a penalty of Rs. 200 per day for each day the return is delayed. The maximum penalty can be equal to the total TDS deducted. Moreover, under Section 271H, if Form 27Q is not filed at all, a penalty between Rs. 10,000 and Rs. 1,00,000 can be imposed. However, this penalty applies if:

• TDS has already been deposited with the government,
• Interest and fees for late filing have been paid, and
• The return is filed one year from the due date.

Conclusion

Form 27Q is used to file TDS returns on non-residents’ payments, including foreign remittances, tax compliance, withholding taxes, and Indian Revenue Services. It ensures tax compliance under Indian taxation, governed by the Double Taxation Avoidance Agreement (DTAA). This form requires deductors to file TDS returns before payments are credited, for proper tax deduction at the source. The procedure includes downloading the TDS utility, providing relevant details, and submitting the return within specified due dates to avoid penalties and interest.

Frequently Asked Questions

Who needs to file Form 27Q?

Any individual or entity who deducts TDS on payments made to non-resident Indians (NRIs) is required to file Form 27Q.

Is Form 27Q required for the sale of the property?

Yes, Form 27Q is used for TDS returns on non-salary payments, including the sale of property owned by an NRI, as property sales do not fall under salary income.

What happens if I miss the due date for filing TDS Form 27Q?

Missing the filing deadline may result in penalties and interest charges. Timely filing is crucial to avoid these financial consequences.

What if the PANs of the deductees are unavailable?

If the PAN of the deductee is not available, TDS will be deducted at a higher rate of 20% as per tax regulations.