Form 27Q

Form 27Q is the statutory quarterly return through which Indian deductors report Tax Deducted at Source (TDS) on payments made to non-residents (including non-resident Indians) and foreign companies. Filed under Section 195 and other non-resident provisions of the Income Tax Act, 1961, Form 27Q covers cross-border payments of interest, royalty, fees for technical services, dividends, capital gains, professional fees and any other India-sourced income payable to a person outside India.

What is Form 27Q?

Form 27Q sits alongside Form 24Q (salary) and Form 26Q (non-salary, residents) as one of the three primary TDS returns. Its scope is unique: any payment that crosses the Indian border to a non-resident or foreign company and is chargeable to tax in India falls within Form 27Q.

The legal trigger is Section 195(1) of the Income Tax Act, which states that any person responsible for paying any sum chargeable under the Act (other than salary covered by Section 192) to a non-resident or foreign company shall, at the time of credit or payment whichever is earlier, deduct income tax at the rates in force. The rate in force is the lower of the rate prescribed in the Finance Act and the rate under the applicable DTAA — provided the non-resident furnishes the documents required to claim the treaty rate.

When Form 27Q is Required

Form 27Q is filed quarterly on the same due dates as Form 24Q and Form 26Q:

Common payment types reported in Form 27Q:

• Interest (Sections 194LB, 194LBA, 194LC, 194LD, 195) — interest on bonds, ECBs, NRO accounts, foreign currency loans
• Royalty and FTS (Section 195) — royalty for IP licensing, fees for technical services
• Dividends (Section 195) — dividends paid to foreign shareholders
• Capital gains (Section 195) — gains on sale of Indian shares or property by a non-resident
• Salary to non-resident (Section 192) — only when the non-resident salary is paid by an Indian payer
• Professional or contractor payments (Section 195) — fees to overseas consultants, freelancers, agencies

The TDS must be deposited via challan ITNS-281 by the 7th of the following month, except for March deductions which are due 30 April.

Withholding Rates Reference

Section 195 doesn’t prescribe rates directly. The applicable rate is the lower of the rate from Part II of the First Schedule to the Finance Act and the DTAA rate, subject to documentation requirements. Common rates for FY 2026-27:

To claim a DTAA rate, the non-resident must provide:

• Tax Residency Certificate (TRC) from the home country tax authority
• Form 10F — the Income Tax Department’s declaration form, mandatorily e-filed since CBDT Notification 03/2022 dated 16 July 2022
• PAN (or the alternative documentation under Rule 37BC)
• A no-PE (no Permanent Establishment) declaration where the treaty article so requires

Without these, Section 206AA applies and the rate defaults to the higher of the Act rate or 20%.

Form 27Q vs Form 26Q

The two forms are often confused because both cover non-salary payments, but the deductee universe is different:

A company that pays both Indian vendors and an overseas consultant must file Form 26Q for the Indian payments and Form 27Q for the overseas one — never the same form for both.

Common Errors and Consequences

Form 27Q is more error-prone than Form 26Q because of the cross-border documentation chain. Frequent issues:

• Missing TRC or expired TRC: TRCs are valid only for the financial year for which they are issued. Using a stale TRC denies the DTAA rate and triggers short-deduction.
• Form 10F not e-filed: Since CBDT Notification 03/2022, paper Form 10F is no longer accepted; the non-resident must e-file via the Income Tax portal. A paper Form 10F is treated as no Form 10F.
• Country code mismatch: Form 27Q requires the ISO country code of the deductee. Wrong code triggers TRACES validation errors.
• PAN not quoted: Without PAN and without Rule 37BC documentation, Section 206AA forces the higher rate.
• Late filing: Section 234E fee of ₹200 per day until filed (capped at the TDS amount), plus Section 271H penalty of ₹10,000 to ₹1,00,000 for non-filing beyond one year.
• No Form 15CA/15CB at remittance: Banks will not process the foreign remittance without these forms. Filing 27Q with a remittance that bypassed 15CA creates an audit trail mismatch.

Practical Example

An Indian SaaS company pays its US-based developer agency for white-label software in Q1 of FY 2026-27. The agency provides a US Tax Residency Certificate, e-filed Form 10F, PAN, and a no-PE declaration.

• Gross invoice: USD 50,000 (₹42,50,000 at ₹85/USD)
• Nature: Fees for Technical Services
• DTAA rate (India–US Article 12): 15%
• TDS deducted: ₹6,37,500
• Net remittance: ₹36,12,500

The company files Form 15CA (Part C) and Form 15CB at the remittance stage, deducts TDS via challan ITNS-281 by 7 May 2026, and reports the deduction in Form 27Q for Q1 by 31 July 2026. The deductee row in Annexure I captures: PAN of the agency, country code US, address abroad, section 195, rate 15%, gross ₹42,50,000, TDS ₹6,37,500. Form 16A is then issued to the agency within 15 days.

If the agency had not provided the TRC and Form 10F, the rate would default to 20% under the Act (higher than the DTAA rate), increasing the withholding to ₹8,50,000.

How Omnivoo Handles Form 27Q

For employers that hire international contractors or pay overseas vendors, Omnivoo handles the full Section 195 chain — collecting the TRC, validating Form 10F e-filing acknowledgement, applying the lower of the Act and DTAA rate, generating Form 15CA/15CB at the remittance event, and aggregating every quarter’s deductions into a pre-validated Form 27Q file. For more on related TDS infrastructure, see Tax Deducted at Source (TDS), Form 26Q and Non-Resident Indian (NRI).