What is Form 27Q? Complete Guide to TDS Return for NRI Payments in India

India’s TDS system doesn’t work on a single return form. It assigns a separate quarterly form to every category of payment and payee. Salary TDS goes into Form 24Q. Non-salary payments to residents go into Form 26Q, whereas the same payments, when made to a non-resident Indian, an OCI cardholder, or a foreign company, get reported through Form 27Q.

If you’re part of an HR, finance, or payroll team, this form becomes relevant whenever your organization:

• Remits interest on NRO accounts

• Pays royalty or technical service fees to a foreign entity

• Settles property sale proceeds with an NRI seller

• Distributes dividends to non-resident shareholders

All of these attract TDS under Section 195 of the Income Tax Act, 1961, and the deductor (that’s you, not the NRI) must report them every quarter through Form 27Q.

One thing to note: Under the new Income Tax Act, 2025, Form 27Q has been renumbered as Form 144, effective 1 April 2026. The filing process and obligations stay the same.

This guide covers everything you need to know about Form 27Q, including its meaning, applicability, TDS rates, due dates, how to file it on TRACES, penalties for non-compliance, and related forms such as 15CA and 15CB.

Managing TDS on NRI payments across quarters? Keka’s payroll platform handles TDS calculations, challan tracking, and quarterly return filing, so your finance team isn’t chasing deadlines manually.

Explore Keka Payroll

What is Form 27Q in TDS?

Form 27Q is a quarterly TDS return that records the details of tax deducted at source on non-salary payments made to non-resident Indians, OCI cardholders, and foreign companies. The deductor (the person or entity making the payment) files it every quarter with the Income Tax Department.

In practice, this form captures how much you paid a non-resident, what kind of income it qualifies as (interest, royalty, capital gains, technical service fees, dividends), how much TDS you withheld, and through which challan you deposited it with the government. Every transaction gets its own row, linked to the relevant TDS section and the challan used to deposit the tax.

Who Must File Form 27Q

Any person, whether resident or non-resident, who deducts TDS under Chapter XVII-B of the Income Tax Act on payments to a non-resident (other than salary) must file Form 27Q. This covers individuals, HUFs, firms, LLPs, companies, trusts, and government bodies.

Both government and non-government deductors have the same core obligations:

• TAN is mandatory: You need a Tax Deduction and Collection Account Number under Section 203A before you can deduct or deposit TDS.

• Deposit via Challan 281: All TDS deducted must go to the government through Challan ITNS 281, by the 7th of the month following deduction. For March, the deadline is 30 April.

• Quarterly filing: Both government and non-government deductors file Form 27Q on the same quarterly schedule (July 31, October 31, January 31, and May 31).

Form 27Q vs Form 26Q vs Form 24Q: What’s the Difference?

All three are quarterly TDS returns uploaded to the same portal. The difference comes down to who you’re paying and what you’re paying them for. Getting the wrong form is a common mistake, and it creates mismatches on TRACES that take time to fix.

A comparison of Forms 24Q, 26Q, and 27Q, showing which TDS return applies based on the type of payment and recipient

Form 26Q: TDS on non-salary payments to residents

Form 26Q covers TDS on non-salary payments made to resident Indians. Think contractor payments, professional fees, rent, commission, interest, insurance commission, and everything else falling under Sections 194A through 194S. If the payee is a resident, the payment is non-salary, and TDS has been deducted, it goes into Form 26Q.

Under the Income Tax Act, 2025, Form 26Q has been renumbered as Form 140.

Form 24Q: TDS on salary under Section 192

Form 24Q is what employers file for TDS deducted on salaries under Section 192. It has two annexures.

• Annexure I captures challan and deductee-level deduction details and must be filed for all four quarters.

• Annexure II carries the full salary breakup for each employee, including exemptions, deductions, and the final tax computation, and is filed only with the Q4 return (January to March).

The Income Tax Act, 2025 has replaced Form 24Q with Form 138, effective 1 April 2026.

A quick comparison across the three:

What Payments Are Covered Under Form 27Q?

Form 27Q covers all non-salary payments made to non-residents that attract TDS in India. In practice, most deductors run into four main categories:

Four main Form 27Q payment categories: interest, royalty and technical service fees, property sales, and partner payments under Section 194T

1. Interest payments

Interest on NRO accounts is one of the most common Form 27Q entries. Banks deduct TDS at 30% under Section 195 on NRO fixed deposit and savings account interest, with no threshold limit. Two concessional rates exist: interest from infrastructure debt funds (Section 194LB) at 5%, and interest on foreign-currency borrowings or long-term bonds by Indian companies (Section 194LC) at 5%.

2. Royalty and technical service fees

Royalty for the use or transfer of copyrights, patents, or trademarks paid to a non-resident attracts 20% TDS under Section 195. The same rate applies to fees for technical services and dividends paid to non-resident shareholders, though dividend TDS can come down significantly under a DTAA.

3. Sale of property

When a resident buyer purchases property from an NRI seller, the buyer deducts TDS under Section 195 and reports it in Form 27Q (not Form 26QB, which covers resident sellers). Long-term capital gains attract 12.5% TDS for FY 2025-26, reduced from 20% after the Budget 2024 changes. Short-term capital gains under Section 111A are taxed at 20%.

4. Partner payments under Section 194T

The newest addition. Section 194T, effective 1 April 2025, requires firms and LLPs to deduct 10% TDS on salary, remuneration, commission, bonus, and interest paid to partners once the aggregate crosses ₹20,000 per financial year. The CBDT has amended Form 27Q to include Section 194T entries, so non-resident partners receiving remuneration or interest on capital get reported here.

One caveat: the interaction between Section 194T and Section 195 for NRI partners is still awaiting CBDT clarification, so firms with non-resident partners should take specific advice.

TDS Rates for NRI Payments Under Form 27Q (FY 2025-26)

These are the base rates under the Finance Act. Surcharge and 4% health and education cess apply on top of these. If a DTAA (The Double Taxation Avoidance Agreement (DTAA)) rate is available and more favorable, the NRI can opt for that instead (DTAA rates are applied without surcharge and cess).

How to Fill Form 27Q Online?

You cannot type Form 27Q directly into a web form. The process runs through a downloadable, Java-based utility, validated by a second utility, and then uploaded to the portal. Here is the workflow:

Form 27Q filing process covering RPU download, challan and deductee details, FVU validation, and TRACES upload

Step 1: Download the Return Preparation Utility (RPU)

Head to the Protean (formerly NSDL) TIN website and navigate to Downloads → e-TDS/e-TCS → Quarterly Returns → Regular.

Download the latest Return Preparation Utility (RPU). As of July 2026, the current version is RPU 6.0 for statements up to FY 2025-26. For Tax Year 2026-27 onwards (under the Income Tax Act, 2025), a separate RPU version 1.1 applies.

The RPU is a Java-based offline tool, so you’ll need the Java Runtime Environment (JRE) installed on your machine.

Once downloaded, extract the zip file and run TDS_RPU.jar. When the utility opens, select Form Type: 27Q and Return Type: Regular.

You can also download the RPU through TRACES under Requested Downloads, though the Protean TIN website is the primary source.

Step 2: Fill in deductor and challan details

Start with your organization’s details: TAN, PAN, name, address, and the details of the person responsible for deduction.

Then enter the challan information for each TDS deposit made during the quarter:

• BSR code of the bank branch where you deposited

• Challan serial number

• Date of deposit

• Tax amount deposited

Pick the right challan type: 0020 for company deductees, 0021 for non-company. Minor head should be 200 for regular TDS payable, or 400 if you’re paying against a demand raised by the department.

Each challan row must match exactly with the OLTAS (Online Tax Accounting System) record. Any mismatch and the return throws validation errors.

Step 3: Fill deductee details

For each NRI payee, enter:

• Name, PAN, country of residence, and address

• If the NRI doesn’t have a PAN, use the appropriate flag: PANNOTAVBL (PAN not available), PANAPPLIED (PAN applied for), or PANINVALID (invalid PAN)

• Nature of payment: select the correct section code (195, 194E, 194LC, etc.)

• Amount paid or credited, TDS deducted, TDS deposited, and applicable rate

If you’re applying a DTAA rate, also enter the relevant treaty article, TRC number, and Form 10F reference. If a lower deduction certificate under Section 197 exists, enter the certificate number so the reduced rate is properly justified in the return.

Step 4: Validate through the FVU and upload to TRACES

Once all entries are complete, click “Validate” in the RPU. This runs the data through the File Validation Utility (FVU), currently version 9.5 for statements up to FY 2025-26. The FVU checks TAN and PAN formats, challan details, section codes, and the file’s structural integrity.

• Validation passes: The utility generates a .fvu file.

• Validation fails: You get an error report listing what needs fixing, row by row. Fix the errors in the RPU and re-validate until you get a clean file.

Upload the .fvu file through the income tax e-filing portal (Statements/Payments → Upload TDS Statement) and authenticate using either a DSC (Digital Signature Certificate) or EVC (Electronic Verification Code).

On successful upload, the system generates an acknowledgement/token number. Save it. You’ll need it for any correction filings or conso-file requests later.

The filing steps above assume the NRI has a PAN. When they don’t, the process changes.

How to File Form 27Q Without PAN?

It’s not uncommon for NRI payees to not have an Indian PAN, especially foreign companies and non-residents who have limited dealings in India. Form 27Q can still be filed without one, but the TDS implications change significantly.

Higher TDS rate under Section 206AA

Section 206AA kicks in when the payee doesn’t furnish a valid PAN to the deductor. In that case, TDS must be deducted at the highest of three rates: the rate specified in the relevant provision of the Finance Act, the rate in force, or 20%. For most NRI payments under Section 195, this effectively means 20% or higher.

In the RPU, mark the PAN field as PANNOTAVBL so the system accepts the return without rejecting it for a missing PAN. If the NRI has applied for a PAN but hasn’t received it yet, use PANAPPLIED instead.

Alternative documentation: Rule 37BC exemption

The higher rate under Section 206AA can be avoided. Rule 37BC provides a specific exemption for non-residents who furnish the following documents to the deductor:

• Name, email address, and contact number

• Address in their country of residence

• Tax Identification Number (TIN) issued by their country of residence

• Tax Residency Certificate (TRC) from the foreign government

If the TRC doesn’t contain all required details, the NRI must also submit Form 10F, a self-declaration that fills in the gaps.

Once all Rule 37BC documents are on file, the deductor can apply the normal treaty rate under DTAA or the standard Section 195 rate, whichever is more beneficial, instead of the default 20%. This makes a real difference. An NRI earning interest income could go from 20% TDS (no PAN, no documentation) to as low as 10-15% under a favourable DTAA, simply by submitting the right paperwork upfront.

How to Download Form 27Q from TRACES

You’ll need to download Form 27Q from TRACES for correction filings, issuing Form 16A, or reconciling TDS credits. Here’s how:

Download the consolidated file

• Log in to TRACES at tdscpc.gov.in using your TAN, user ID, and password

• Navigate to Statements/Payments → Request for Conso File

• Select the Financial Year, Quarter, and Form Type (27Q)

• Complete KYC validation by entering the token number from the originally filed return and the PAN of the responsible person

• Once the status shows “Available” under Requested Downloads, download the zip file. It contains the .tds file you’ll import into the RPU for corrections

Form 27Q PDF download and TXT formats

• PDF: Password-protected (TAN in uppercase + date of birth/incorporation in DDMMYYYY format). Used for viewing and record-keeping.

• TXT: Machine-readable format used for importing into the RPU for corrections.

Justification report

Before filing any correction, download the Justification Report from Statements/Payments → Justification Report. It lists every default the system found in your return: PAN mismatches, short deduction flags, challan errors. Use it as your correction checklist.

Form 27Q Correction and Revision

Filed a Form 27Q with the wrong PAN, a mismatched challan, or a missing deductee? You don’t need to panic. TRACES allows correction returns, and you can file them as many times as needed. Each correction filing replaces the previous version entirely.

Correction types

Every correction falls into a specific category, and you’ll need to select the right one in the RPU before making changes:

Need to add a completely new challan or deductee row that was missing from the original return? That’s handled through a C9 correction, which some sources bundle under C5. Always confirm the exact type your RPU version supports before filing.

Filing a correction return via TRACES

The process builds on the consolidated file download covered in the previous section. Import the conso file (.tds) into the RPU, select “Correction” as the return type, and pick the relevant correction category. Make your changes in the affected rows, run FVU validation, fix any errors, and upload the corrected .fvu file to TRACES with DSC or EVC authentication.

One practical tip: don’t file corrections based on guesswork. Download the Justification Report first, identify the exact defaults, and then correct only those rows. Blanket changes across the return can introduce new errors.

Condonation of delay

If you filed the original return after the due date, the Section 234E fee (₹200/day) is already locked in and non-negotiable. But the Section 271H penalty (₹10,000 to ₹1,00,000) can potentially be avoided.

No penalty under Section 271H is levied if all three conditions are met: TDS has been deposited with the government, interest and the Section 234E fee have been paid, and the return was filed within one year of the due date.

To request condonation, go to Statements/Payments → Condonation Request on TRACES, select the relevant quarter, and submit. This doesn’t guarantee a waiver, but if the three conditions above are satisfied, the penalty is typically not imposed.

Late Filing Penalty for Form 27Q

Three separate penalties can hit you for non-compliance, and they stack. Understanding which one applies when is important because most deductors confuse the fee, the penalty, and the interest, and end up underpaying.

1. Section 234E: Fee for Late Filing

If you file Form 27Q after the due date, a mandatory fee of ₹200 per day applies from the due date until the date you actually file. The fee is capped at the total TDS amount for that quarter, so it can never exceed what you deducted.

Example: You deducted ₹50,000 in TDS during Q2 but filed the return 20 days late. The fee works out to 20 × ₹200 = ₹4,000. Since ₹4,000 is well within the ₹50,000 cap, you pay the full ₹4,000.

This fee is not discretionary. The department doesn’t waive it, and you must pay it before you can file the belated return.

2. Section 271H: Penalty for Late or Incorrect Filing

Over and above the Section 234E fee, the Assessing Officer can levy a penalty between ₹10,000 and ₹1,00,000 under Section 271H. This applies to both late filing and filing with incorrect information (wrong PAN, wrong section code, mismatched challan details, etc.).

The important carve-out: no penalty under Section 271H is levied if all three conditions are met:

• TDS has been deposited with the government

• Interest and the Section 234E late filing fee have already been paid

• The return is filed before the completion of one year from the due date

Miss any one of these and the AO has the discretion to impose the penalty.

3. Section 201(1A): Interest on Late TDS Deposit

This one is separate from the filing penalties and applies to the deposit side.

• Non-deduction: If you failed to deduct TDS when you should have, interest applies at 1% per month (or part of a month) from the date the tax was deductible to the date you actually deducted it.

• Late deposit: If you deducted TDS but didn’t deposit it on time, interest applies at 1.5% per month (or part of a month) from the date of deduction to the date of deposit.

Section 201(1A) interest and Section 234E fee are independent of each other. You can owe both at the same time: the fee for filing the return late, and the interest for depositing the tax

Getting Form 27Q Right

The compliance chain for Form 27Q is simple to state: deduct TDS under Section 195 when the payment is made or credited, deposit it by the 7th of the following month, file the quarterly return by the due date, and issue Form 16A to the NRI payee within 15 days.

Where teams run into trouble is not the process itself but the details around it. Applying the wrong rate because the NRI didn’t submit their TRC on time. Missing a DTAA benefit because nobody collected Form 10F. Letting a quarter slip because only one small payment went to a non-resident.

Those gaps cost real money: ₹200/day under Section 234E, penalties up to ₹1,00,000 under Section 271H, and Section 201(1A) interest running in parallel.

The fix is building documentation into the payment workflow, not the filing workflow. Collect the TRC and Form 10F before you release the payment. Confirm the section code and rate at the time of deduction. And if you haven’t already, update your internal checklists and software from Form 27Q to Form 144 for Tax Year 2026-27 onwards, as per the Income Tax Act, 2025.

If your team is managing multiple NRI deductees across quarters, Keka’s payroll and compliance platform can help you automate your TDS compliance and stay on top of quarterly deadlines.

Book your demo today

Frequently Asked Questions

1. What happens if the NRI payee has no PAN?

Under Section 206AA, TDS must be deducted at the higher of the rate specified in the Finance Act, the rate in force, or 20%, whichever is highest. In Form 27Q, mark the PAN field as PANNOTAVBL so the return is accepted by the system while applying the higher deduction rate.

2. How can an NRI avoid the higher 20% rate when they don’t have a PAN?

Rule 37BC exempts non-resident payees from the higher Section 206AA rate if they furnish specific documentation to the deductor: their name, email, and contact number; their address in the country of residence; their Tax Identification Number (TIN); and a Tax Residency Certificate (TRC) from the foreign government. If the TRC doesn’t contain all required details, the NRI must also submit Form 10F as a supporting self-declaration. With all Rule 37BC documents in place, TDS is deducted at the normal treaty rate or Section 195 rate instead of the 20% default.

Note: Some sources label these categories differently (for instance, listing C4 and C5 instead of C5 and C9). Always confirm the exact correction type against your RPU version before filing.

3. What are the steps to file a correction return on TRACES?

Start by downloading the consolidated file from TRACES under Statements/Payments → Request for Conso File, selecting the relevant Financial Year and Quarter, and completing KYC validation. Once downloaded, import the file into the RPU and select the appropriate correction type. Make the required changes in the relevant rows, then run FVU validation and fix any errors that come up. Once you have a clean .fvu file, upload it to TRACES and authenticate using DSC or EVC.

4. Is Form 27Q required when property is sold BY an NRI?

Yes. When a resident buyer purchases property from an NRI seller, the buyer must deduct TDS on the sale proceeds under Section 195 and report it in Form 27Q for that quarter. This is different from buying property from a resident seller, which goes through Form 26QB.

5. Can DTAA rates be applied in Form 27Q?

Yes. If the NRI provides a valid Tax Residency Certificate (TRC) and Form 10F, the deductor can apply the applicable DTAA rate and reflect it in Form 27Q. The DTAA rate is often lower than the standard domestic rate under Section 195.