TDS Return On Payments To Non-Residents: Form 27Q Is Now Form 144

Every rupee paid to an NRI, a foreign company, or any other non-resident, whether it is rent, professional fees, royalty, or property sale proceeds, has always needed a Form 27Q filing once TDS was deducted. This is the return that tracks cross-border withholding tax. It keeps doing exactly that job under the new Act, now under a different number and a different section reference, with no minimum threshold change and no relief on the strict documentation this category has always demanded.

Old form: Form 27Q, filed under Section 195 of the Income Tax Act, 1961

New form: Form 144, filed under Section 393(2) of the Income Tax Act, 2025, read with Rule 219 of the Income Tax Rules, 2026, applicable from Tax Year 2026-27 onwards

What the Form Covers

Form 27Q, and now Form 144, is the quarterly TDS statement for tax deducted on payments, other than salary, made to non-resident individuals, NRIs, and foreign companies. It covers a wide range of cross-border payments:

• Interest paid to non-residents
• Royalty and fees for technical services
• Professional fees and contract payments
• Rent paid to an NRI landlord
• Sale proceeds on purchase of property from an NRI seller, where capital gains TDS applies
• Dividends and other taxable remittances

Unlike domestic TDS provisions, there is no minimum threshold below which TDS can be skipped. Every payment covered under this provision requires deduction regardless of amount, and the deductor must have a TAN before making any such payment.

What Actually Changed

• Form number: 27Q becomes 144
• Section reference: Section 195, long the anchor provision for NRI TDS, becomes Section 393(2) under the new Act
• Payment codes replace remittance-type labels: individual entries in Form 144 are now tagged using numeric payment codes in the 1039 to 1057 range, broadly, rather than being described purely by remittance type as under the old form
• Higher rate for missing PAN unchanged in substance, renumbered: the requirement to deduct at a higher rate, typically 20 percent, when the non-resident does not furnish a valid PAN or alternative residency documentation, continues under the new Act, now referenced under Section 397(2) in place of old Section 206AA
• Lower deduction certificate renumbered: the application for a nil or lower TDS certificate, filed by the non-resident with the assessing officer, moves from old Form 13 to new Form 128
• TDS certificate renumbered: Form 16A, issued to the non-resident deductee as proof of TDS, becomes Form 131, the same certificate renumbering that applies across all non-salary TDS categories
• Filing deadlines unchanged: July 31, October 31, January 31, and April 30 for Q4, broadly consistent with the pattern used for other TDS returns, though some sources note a 30-day-from-quarter-end structure specifically for this form, so confirm the exact due date each quarter

DTAA benefits continue to apply exactly as before. Where a non-resident is eligible for a lower rate under a Double Taxation Avoidance Agreement, that lower rate can still be applied in Form 144, but only after the non-resident furnishes a valid Tax Residency Certificate. Applying a DTAA rate without a valid TRC on file remains a compliance risk under the new Act just as it was under the old one.

Worked Example

Old position, Form 27Q, applicable up to Q4 of FY 2025-26:

An Indian company pays technical service fees of Rs. 20,00,000 to a foreign consulting firm in Q3 of FY 2025-26. TDS is deducted under Section 195 at the applicable rate, after checking whether the foreign firm's country has a DTAA with India that offers a lower rate, and confirming a valid Tax Residency Certificate is on file. The deduction is reported in Form 27Q for that quarter, citing Section 195, and the foreign firm receives Form 16A as proof of tax deducted.

New position, Form 144, applicable from Q1 of FY 2026-27 onwards:

The same company makes an identical technical service fee payment in the equivalent quarter of FY 2026-27. TDS is deducted under Section 393(2), with the same DTAA and Tax Residency Certificate check applied as before. The deduction is now reported in Form 144, with the entry carrying a payment code from the 1039 to 1057 range instead of a Section 195 citation. The foreign firm now receives Form 131 in place of Form 16A. The tax rate, the DTAA eligibility check, and the documentation requirement are all unchanged. Only the form number, section reference, and certificate number are different.

Why This Matters for Filing

• Since there is no threshold exemption on this category, every single payment to a non-resident, however small, needs TDS deduction and reporting under Form 144. This has not changed and remains a common area where smaller payments get missed.
• Confirm the deductee has a valid PAN before applying any DTAA-based lower rate. Without PAN, and without proper alternative documentation, the higher rate under Section 397(2) applies regardless of any treaty benefit the deductee might otherwise be entitled to.
• Always obtain and retain the Tax Residency Certificate before applying a DTAA rate in Form 144. Filing with a DTAA rate but no TRC on file exposes the deductor to disallowance of the lower rate and potential short-deduction demands later.
• This form is especially relevant for clients dealing with NRI property transactions, since sale proceeds paid to an NRI seller attract TDS under this same provision, and the buyer, not the seller, is responsible for correct deduction and Form 144 filing.

Bottom Line

Form 27Q has become Form 144, and every core requirement, no threshold exemption, mandatory TAN, DTAA rates conditional on a valid Tax Residency Certificate, and higher deduction without PAN, carries forward unchanged. What has changed is the section reference, moving from the long-familiar Section 195 to Section 393(2), the payment code system replacing remittance-type descriptions, and the certificate issued to the deductee, now Form 131 instead of Form 16A. For any client making cross-border payments, the compliance discipline required has not eased at all.