Guide on TDS Compliance on payment to Non-Resident: All about TDS return filing after payment

 

When TDS is deducted under Section 194 or Section 195 (which actually applies to payments to non-residents, such as fees for technical services, royalty, interest, or any other sum chargeable under the Act), the process of filing the TDS return is slightly different from domestic TDS compliances, though done through the same system.

Let’s go step by step

1.  Applicable Section:

Section 194 or Section 195 deals with deduction of tax at source on any sum (other than salary) payable to a non-resident or foreign company, which is chargeable to tax in India.
Common examples:

•  Professional or consultancy fees paid to foreign entities

•  Royalty or technical service fees

•  Interest payments

•  Reimbursements that include income component

2.  Due Date of Deposit

The TDS deducted under Section 194 must be deposited within:

•  7 days from the end of the month in which TDS is deducted (for all months except March)

•  30th April for deductions made in the month of March

Deposit the TDS using Challan No. ITNS 281.

Important:

•  Use Major Head 0020 (for companies) or 0021 (for non-corporate deductees).

•  Mention the correct section code – 194E/195/194LB/194LC, depending on the nature of payment. (If you’re certain it’s section 194 as per your context, then use that.)

3.  Form for TDS Return

TDS on payments to non-residents is reported in Form 27Q (not Form 26Q).

Form 27Q is the quarterly statement for:

•  All payments to non-residents (excluding salaries),

•  Where TDS has been deducted under any of the following sections: 194E, 194LB, 194LC, 194LD, 195, etc.
(Technically, Section 194 is old numbering — in practice, most non-resident payments now fall under Section 195. Please cross-check the exact section quoted in your TDS certificate or challan.)

4.  When to File Form 27Q (TDS Return Due Dates)

Quarter	Period Covered	Due Date for Filing Form 27Q
Q1	1st April – 30th June	31st July
Q2	1st July – 30th Sept	31st October
Q3	1st Oct – 31st Dec	31st January
Q4	1st Jan – 31st March	31st May

5.  Where and How to File

Method:
File electronically through the TIN-NSDL website (https://www.protean-tinpan.com/), or using your TRACES account via approved TDS filing utilities (such as RPU/NSDL file validation).

Steps:

1.  Prepare the return using Return Preparation Utility (RPU)available on TIN-NSDL.

2.  Validate using File Validation Utility (FVU).

3.  Upload the validated .fvu file on the TIN portalthrough your TAN login or via your TDS filing intermediary.

4.  Download the Acknowledgment (Form 27Q Receipt).

6.  Additional Compliance Points

•  PAN of Non-Resident: If PAN is not available, TDS must be deducted at 20% or higher, as per Section 206AA.

•  DTAA Benefit: If you applied a lower TDS rate under DTAA, retain the Tax Residency Certificate (TRC) and Form 10F from the non-resident.

•  Form 15CA/15CB:
For most payments to non-residents, Form 15CA (declaration by remitter) and Form 15CB (CA certificate) are also required before remittance.
These are filed on the income tax e-filing portal → “e-file → Income Tax Forms → File Form 15CA/15CB.”

7.  After Filing the Return

•  You can download Form 16A (TDS Certificate) for the non-resident deductee from the TRACES portal.

•  Issue this certificate to the non-resident within 15 days from the due date of filing Form 27Q.

8.  Penalties for Delay

Nature of Default	Section	Penalty
Late filing of return	234E	₹200 per day till filed (max = TDS amount)
Failure to file after notice	271H	₹10,000 to ₹1,00,000
Late deposit of TDS	201(1A)	Interest @ 1.5% per month till date of deposit

In Short

Step	Action	Form/Portal	Timeline
1	Deduct TDS	—	At time of payment/credit
2	Deposit TDS	Challan ITNS 281	Within 7 days (or by 30th Apr for March)
3	File Return	Form 27Q on TIN portal	By end of next quarter
4	File 15CA/15CB	Income Tax e-filing portal	Before remittance
5	Issue Certificate	Form 16A from TRACES	Within 15 days of return filing

If you can tell me:

•  The exact nature of payment (e.g., technical fees, interest, royalty), and

•  Whether it was paid to an individual, company, or foreign consultant,
I can confirm the exact section (194/195/194E) and guide you on precise rate, DTAA applicability, and form details.

Would you like me to help you identify the correct section and rate for your specific payment?

You said:

TDS has been done under section 195

ChatGPT said:

Perfect – that makes things much clearer.

So, since TDS has been deducted under Section 195, here’s your complete and practical guide on how, when, and where to file the TDS return for payment to a non-resident

Section 195 – Overview

Section 195 applies when any person (resident or non-resident) makes payment to a non-resident or foreign company, which is chargeable to tax in India under the Income Tax Act.

Common examples:

•  Payment for consultancy or professional services to a foreign entity

•  Interest on foreign loans

•  Royalty, technical fees, or software usage charges

•  Commission or any other sum taxable in India

Step-by-Step Compliance under Section 195

Step 1: Deduct TDS at the time of credit or payment

TDS is to be deducted at the time of credit to the payee’s account or actual payment, whichever is earlier.

 

Rate of TDS:
As per the Income Tax Act or the DTAA (Double Tax Avoidance Agreement) – whichever is more beneficial to the non-resident.
If DTAA rate is applied, you must collect:

•  Tax Residency Certificate (TRC)

•  Form 10F from the payee

•  Declaration of no PE (if applicable)

Step 2: Deposit of TDS

Deposit the deducted TDS using Challan No. ITNS 281
Code:

•  0020 – Companies

•  0021 – Non-Companies

Section code: Select “195 – Payment to Non-resident”

Due Date for Deposit:

•  Within 7 days from the end of the month in which TDS is deducted,

•  For March deductions – by 30th April of next financial year.

Step 3: File Form 15CA / 15CB (for remittance)

Before making foreign remittance, you need to submit:

Form	Filed By	Requirement
Form 15CA	Remitter (You)	Declaration of TDS deduction on payment to non-resident
Form 15CB	Chartered Accountant	Certificate confirming nature of payment, rate, and tax deduction

File these forms on the Income Tax e-Filing portal under:
e-File → Income Tax Forms → File Form 15CA/15CB

Step 4: File Quarterly TDS Return – Form 27Q

All TDS under Section 195 (non-resident payments) is to be reported in Form 27Q.

Form 27Q covers all payments (other than salary) made to non-residents.

 

Due Dates for Filing Form 27Q

Quarter	Period	Due Date
Q1	Apr–Jun	31st July
Q2	Jul–Sep	31st October
Q3	Oct–Dec	31st January
Q4	Jan–Mar	31st May

Step 5: How to File Form 27Q

You can file Form 27Q online through the Protean (formerly TIN-NSDL) portal or your TRACES/TDS filing software.

Procedure:

1.  Prepare the return using Return Preparation Utility (RPU)from Protean.

2.  Validate using File Validation Utility (FVU).

3.  Upload the .fvu file on the Protean e-TDS Upload Portalusing your TAN login or through an intermediary.

4.  After successful upload, download the Acknowledgment (Provisional Receipt).

TIN Protean TDS Portal

Step 6: Download and Issue Form 16A (TDS Certificate)

After the TDS return (Form 27Q) is processed:

1.  Log in to TRACES (https://www.tdscpc.gov.in/)

2.  Download Form 16Afor each deductee

3.  Issue Form 16Ato the non-resident within 15 days from the due date of filing Form 27Q

Example Timeline (Illustration)

Let’s say you made a payment to a non-resident consultant on 10th August 2025 and deducted TDS under Section 195.

Compliance	Form	Due Date
Deposit of TDS	Challan 281	By 7th September 2025
File 15CA/15CB	—	Before remittance
File TDS Return	Form 27Q	By 31st October 2025
Issue TDS Certificate	Form 16A	By 15th November 2025

Penalties for Non-Compliance

Nature of Default	Section	Penalty/Interest
Late deposit of TDS	201(1A)	1.5% per month till payment
Late filing of return	234E	₹200 per day (max = TDS amount)
Failure to file after notice	271H	₹10,000 – ₹1,00,000
Non-deduction or short deduction	201(1)	Tax + interest @ 1% p.m.

Summary Table

Step	Form	Portal	Due Date
Deduct TDS	—	—	At credit/payment
Deposit TDS	Challan ITNS 281	Income Tax Payment Portal	Within 7 days (30 Apr for March)
File remittance declaration	Form 15CA/15CB	Income Tax e-filing portal	Before remittance
File TDS Return	Form 27Q	Protean (TIN-NSDL)	Quarterly
Issue TDS Certificate	Form 16A	TRACES	15 days after due date