Non-Resident TDS in India (FY 2026–27): Key Points You Must Know
Non-Resident TDS remains an important compliance area for businesses and individuals dealing with cross-border payments. For FY 2026–27, the rules are largely unchanged, and understanding the basics can help avoid costly errors.
1. Applicable Law
TDS on payments to non-residents is governed by Section 195 of the Income-tax Act, 1961. Proposed changes under the Income Tax Act, 2025 (such as Section 393) are not yet in effect.
2. When is TDS Required?
TDS applies only if the income is taxable in India. There is no automatic deduction requirement on every payment—taxability must be checked first.
3. DTAA Benefits
Tax rates can be reduced using Double Taxation Avoidance Agreements (DTAA). To claim benefits, the non-resident must provide:
- Tax Residency Certificate (TRC)
- Form 10F
- Beneficial ownership declaration
Without these, higher domestic rates apply.
4. Common TDS Rates
- Interest: 10%–20%
- Royalty/FTS: 10%
- Rent: 30%
- Capital gains: 10% / 15% / 20%
- Sports/entertainers: 20%
DTAA may reduce these rates.
5. Compliance Essentials
- Deduct TDS at payment or credit, whichever is earlier
- Deposit by 7th of next month
- File Form 27Q
- Issue Form 16A
6. Special Case: Property Purchase
When buying property from a non-resident:
- TDS applies on full sale value
- Buyer is responsible for deduction
7. Key Risks
- Ignoring taxability check
- Missing DTAA documents
- Late payment or filing
Consequences: interest, penalties, and disallowance of expenses.
Conclusion
For FY 2026–27, Section 195 and DTAA rules remain the foundation of Non-Resident TDS. The focus should be on correct taxability assessment, proper documentation, and timely compliance to avoid penalties and ensure smooth transactions.