Form 144 Under Income Tax Act 2025: Complete TDS Guide 2026

Making payments to Non-Resident Indians (NRIs), foreign companies, or overseas consultants? If you're an Indian business or individual deducting tax at source on cross-border payments, understanding Form 144 is non-negotiable. From 1st April 2026, the new Income Tax Act 2025 has restructured TDS compliance, replacing the old Form 27Q with Form 144 and renumbering Section 195 as Section 393(2). Missing quarterly deadlines or misreporting can attract penalties up to ₹1,00,000 and expense disallowance under Section 40(a)(i).

This comprehensive guide walks you through everything about Form 144 for Tax Year 2026-27: who must file, which payments are covered, applicable TDS rates, DTAA benefits, filing deadlines, and how to avoid costly compliance errors.

What is Form 144 Under the Income Tax Act 2025?

Form No. 144, introduced under Section 397(3)(b) of the Income-tax Act, 2025, is a quarterly statement for reporting tax deducted at source (TDS) on payments, other than salary, made to non-residents. It replaces the earlier Form 27Q and is governed by Rule 219 of the Income-tax Rules, 2026.

The form is mandatory for all deductors—such as companies, firms, individuals, or government entities—who deduct tax on specified non-salary payments including interest, royalties, technical fees, dividends, and other applicable income. This includes payments to NRIs selling property in India, foreign consultants providing professional services, or overseas software vendors.

How Form 144 Differs from Form 27Q

While the core compliance remains the same, this form serves as the replacement for the erstwhile Form 27Q with several key enhancements. The revised 2026 format includes system-friendly features such as pre-filled data fields, real-time validation checks, and replacement of "Assessment Year" with "Tax Year" terminology. The form is filed exclusively through the TRACES portal (TIN-Protean TDS return utility), not through the e-filing portal at incometaxindia.gov.in.

Scope and Coverage of Form 144

The form is designed to capture cross-border or foreign remittances on which tax has been withheld. This covers payments such as interest, dividends, royalties, fees for technical services (FTS), professional fees, contract payments, and capital gains (e.g., purchase of property from an NRI). From October 2026 onwards, resident individuals or Hindu Undivided Family (HUF) are not required to obtain a Tax Deduction and Collection Number (TAN) for deducting tax at source on any consideration for transfer of any immovable property to a seller who is a non-resident. In such cases, the buyer would deduct tax using his Permanent Account Number (PAN).

Understanding Section 393(2): The New Section 195

The provisions relating to deduction of tax at source on payments made to non-residents have been restructured under the Income-tax Act, 2025. The earlier Section 195 of the Income-tax Act, 1961 is now covered under Section 393(2) [Table: Sl. No. 17], effective from 1st April, 2026. This restructuring prescribes applicable TDS rates for payments made to non-residents while continuing the existing framework of taxation on non-resident income (excluding salary).

What Payments Are Covered Under Section 393(2)?

Any person making a payment (other than salary) to a non-resident must deduct TDS under Section 195 if the income is taxable in India. There is no minimum threshold; TDS applies from the first rupee of taxable income. Common payment types include:

• Interest payments to foreign lenders or NRI FD holders
• Royalty and license fees for use of patents, trademarks, or copyrights
• Fees for technical services (FTS) including consultancy and professional fees
• Dividends distributed to non-resident shareholders
• Rent payments to NRI landlords for property in India
• Capital gains on purchase of immovable property from NRIs
• Commission and brokerage paid to foreign agents

Salary payments to non-residents are covered separately under Section 392 and reported in Form 138, not Form 144.

Who is Considered a Non-Resident?

A non-resident is any person who is not a resident of India under Section 6 of the Income Tax Act. This includes NRIs, foreign nationals, foreign companies, and foreign entities. The residential status is determined based on the number of days an individual stays in India during the financial year and the preceding four years.

TDS Rates for Non-Resident Payments: Tax Year 2026-27

TDS rates under Section 393(2) vary based on the nature of payment. Health & Education Cess at 4% applies in addition to the base TDS rate for all non-resident payments. Here are the standard rates for common payment types:

Higher TDS Rate Without Valid PAN

If the valid PAN is not furnished or is incorrect, tax deduction (TDS) is at a higher rate – typically 20% or as per the provisions of the Income Tax Act. This rule is enforced under Section 397(2) / 206AA and applies even if the applicable TDS rate is lower. Always collect PAN or foreign Tax Identification Number (TIN) from non-resident payees before making payments.

DTAA Benefits: Lower Tax Rates

DTAA benefits can reduce these rates significantly. India has tax treaties with 90+ countries. To apply the lower treaty rate, the non-resident must provide a Tax Residency Certificate (TRC) and Form 10F. For example, under the India-USA DTAA, technical service fees may attract TDS at 10-15% instead of the domestic 20%.

Non-residents may claim TDS at lower DTAA rates by submitting Form 10F and a valid Tax Residency Certificate. From 1 April 2026, CBDT circulars on DTAA application are mandatorily binding. This means CBDT guidelines on treaty interpretation carry legal weight and must be followed by all deductors.

Calculate your exact tax liability using our Income Tax Calculator to understand the impact of TDS on your total tax outgo.

Structure of Form 144: What Information is Required?

The statement follows a consolidated layout designed to enable seamless integration with the tax portal. It is divided into the following sections: Part A (Deductor Details) captures the deductor's entity or individual particulars, including TAN, PAN, and the details of the person responsible for making the tax deduction. Part B (Challan Details) contains information relating to the tax already deposited with the government, such as the BSR code, date of deposit, challan serial number, and the total amounts of tax, interest, and fees paid.

Deductee-wise Annexure

The Annexure provides deductee wise break up of TDS: PAN (if available), Name, TIN, Address, Contact Information, Status, Country to which remittance is made, Amount paid or credited, Date of payment or credit, Tax Deducted, Tax Deposited, Date of Deduction, Rate, Rate of TDS is as per IT Act or DTAA, Reason for non/lower/higher Deduction, Certificate Number u/s 395, etc.

Key fields in the annexure include:

• Non-resident's PAN or foreign TIN
• Country of residence and remittance
• Nature of payment (mapped to specific payment code)
• Gross amount paid or credited
• TDS amount deducted and date of deduction
• Rate applied: Domestic Act rate or DTAA rate
• Lower deduction certificate details (if applicable)

Each transaction must be reported separately with complete accuracy. Track your TDS deductions easily using our Form 26AS / TDS Fetch Tool to verify that deducted amounts reflect correctly in your tax credit statement.

Filing Process and Quarterly Due Dates for Form 144

The form must be filed electronically for each quarter within prescribed due dates: 31st July (Q1), 31st October (Q2), 31st January (Q3), and 31st May (Q4 of the following financial year). Here's the complete quarterly schedule for Tax Year 2026-27:

• Q1 (April to June 2026): File by 31st July 2026
• Q2 (July to September 2026): File by 31st October 2026
• Q3 (October to December 2026): File by 31st January 2027
• Q4 (January to March 2027): File by 31st May 2027

Step-by-Step Filing Process

1. Deduct TDS: Deduct tax at the time of payment or credit to the non-resident's account, whichever is earlier
2. Deposit Tax: Pay TDS to the government within 7 days from the end of the month of deduction (except March TDS, which must be deposited by 30th April)
3. Prepare Form 144: Use the prescribed TDS return preparation utility available on TRACES or NSDL website
4. Validate Data: Run validation checks to ensure all mandatory fields are filled and challan details match government records
5. Upload to TRACES: Submit the validated file through the TRACES portal (not the e-filing portal)
6. Obtain ARN: After successful submission, you'll receive an Acknowledgment Receipt Number (ARN) as proof of filing
7. Issue Form 131: Generate and issue Form 131 (TDS certificate, earlier Form 16A) to each non-resident deductee within 15 days of filing

Can Form 144 Be Corrected After Filing?

Once submitted, the form cannot be edited; however, correction statements may be filed within two years from the end of the relevant tax year after processing by CPC-TDS. If you discover errors such as wrong PAN, incorrect payment amounts, or missing challan mapping, you must file a correction statement through the same TRACES portal once the original return is processed.

Penalties and Consequences for Non-Compliance

Non-compliance with Form 144 filing requirements attracts severe penalties under the Income Tax Act 2025:

Late Filing Penalties

Delaying the filing beyond the prescribed due date invites an automatic late fee under Section 427, levied at ₹200 per day until the statement is submitted - subject to a ceiling equivalent to the total TDS amount for that return. In addition, failure to file or submission of inaccurate information may result in substantial penalties, ranging from ₹10,000 to ₹1,00,000.

Interest on Late Deduction or Deposit

Interest is calculated on: Non-deduction of TDS: 1% per month from the date the tax was deductible to the actual date of deduction; TDS deducted but not deposited: 1.5% per month from the date of deduction to the date of actual deposit. Interest is calculated on a monthly basis, even for part of a month.

Expense Disallowance Risk

The 30% disallowance under Section 40(a)(i) is the most painful consequence for businesses. If you pay Rs 10 lakh to a foreign vendor without deducting TDS, Rs 3 lakh of that expense is disallowed in your profit and loss computation, increasing your taxable income. This can significantly increase your final tax liability.

Higher TDS Rate Without PAN

If the non-resident recipient fails to provide a valid PAN and no alternative foreign residency documentation is furnished, the statutory higher deduction rate (typically 20%) becomes applicable under Section 397(2).

Form 145 (15CA) and Form 146 (15CB) Requirements

Form 15CA/15CB must be filed for foreign remittances exceeding Rs 5 lakh in aggregate per payee per financial year. Form 15CB is a Chartered Accountant certificate. These forms are mandatory compliance documents for remittances to non-residents:

• Form 145 (earlier 15CA): Declaration by the remitter providing details of remittance and TDS compliance
• Form 146 (earlier 15CB): Certificate by Chartered Accountant verifying nature of payment, applicable tax provisions, and TDS computation

Both forms must be filed on the income tax e-filing portal before processing the foreign remittance through your bank. Banks typically require the acknowledgment number of Form 145 to process payments exceeding ₹5 lakh.

Real-World Examples: Form 144 Filing Scenarios

Example 1: Payment to Foreign Consultant

ABC Pvt Ltd, an Indian company, pays ₹8,00,000 to a US-based marketing consultant for services rendered in June 2026. The consultant provides a valid TRC and Form 10F. Under the India-USA DTAA, the FTS rate is 10% (instead of domestic 20%).

TDS Calculation:

• Gross payment: ₹8,00,000
• TDS @ 10%: ₹80,000
• Health & Education Cess @ 4%: ₹3,200
• Total TDS: ₹83,200
• Net payment to consultant: ₹7,16,800

ABC Ltd must deposit ₹83,200 by 7th July 2026 and file Form 144 by 31st July 2026 for Q1.

Example 2: Purchase of Property from NRI

Mr. Sharma (resident individual) purchases a flat from an NRI seller Ms. Gupta for ₹75,00,000 in August 2026. The property was held for over 24 months (long-term capital asset). From 1 October 2026, Mr. Sharma can use his PAN instead of obtaining TAN for this transaction.

TDS Calculation:

• Sale consideration: ₹75,00,000
• TDS @ 12.5% (LTCG rate): ₹9,37,500
• Mr. Sharma deducts and deposits TDS, then files Form 144 for Q2 by 31st October 2026

For more property-related tax calculations, use our Capital Gain Calculator to compute exact tax liability on real estate transactions.

Form 131: TDS Certificate for Non-Residents

Based on Form No. 144 data, TRACES generates Form 131 (earlier Form 16A) as the TDS certificate for non-salary payments. The deducted TDS appears in the deductee's Form 168 and Annual Information Statement (AIS).

Deductors must issue TDS certificates (Form 131) within 15 days from the due date of filing. The deducted TDS details are also reflected in the deductee's AIS/Form 168 to enable proper tax credit claims. Non-resident payees use Form 131 to claim tax credit when filing their Indian income tax returns or to claim relief in their home country under DTAA provisions.

Key Changes from Income Tax Act 2025 and Budget 2026

Several important updates effective from 1st April 2026:

Terminology Changes

"Previous Year" and "Assessment Year" are abolished — replaced by a single "Tax Year". Tax Year 2026-27 = 1 April 2026 to 31 March 2027. All TDS returns, challans and certificates must use Tax Year references.

CBDT Circulars Now Binding

Section 400(2) of Income Tax Act 2025 (amended by Finance Act 2026) makes all CBDT circulars on TDS and TCS mandatorily binding on all deductors and tax authorities. The earlier argument that CBDT circulars are "merely advisory" is overturned. This covers circulars on perquisites, VDA, DTAA application, and all other TDS areas.

NRI Property Transaction Simplification

TDS on the sale of immovable property by a non-resident is proposed to be deducted and deposited using the resident buyer's PAN, eliminating the need for a separate TAN. This streamlines administration, reduces paperwork, and lowers procedural barriers for both buyers and non-resident sellers. This change is effective from 1st October 2026.

MAT Exemption for Non-Residents

Non-residents who avail the presumptive scheme of taxation are exempt from applicability of Minimum Alternate Tax (MAT) provisions. Budget 2026 extended this exemption to all non-residents who pay tax on a presumptive basis, reducing compliance burden.

Common Mistakes to Avoid While Filing Form 144

• Missing quarterly deadlines: Set calendar reminders for all four quarterly due dates to avoid ₹200/day late fees
• Incorrect challan mapping: Ensure BSR code, challan serial number, and deposit date match exactly with government records
• Not collecting TRC for DTAA: Always obtain Tax Residency Certificate and Form 10F before applying treaty rates
• Wrong PAN/TIN reporting: Verify foreign TIN or Indian PAN of payee before filing—errors cannot be edited after submission
• Ignoring Form 145/146 compliance: File these forms for remittances above ₹5 lakh before processing payment
• Using e-filing portal: Form 144 must be filed through TRACES portal, not incometaxindia.gov.in
• Not issuing Form 131 on time: Generate TDS certificates within 15 days of filing the return

Conclusion

Form 144 compliance is critical for any business or individual making payments to non-residents. With the new Income Tax Act 2025 in force from 1st April 2026, understanding the restructured Section 393(2), quarterly filing deadlines, applicable TDS rates, and DTAA benefits is essential to avoid penalties and expense disallowances.

Remember: there is no threshold limit for TDS on non-resident payments—every rupee counts. File quarterly returns on time, maintain complete documentation including TRC and Form 10F for DTAA claims, and issue Form 131 certificates promptly to your non-resident payees.

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Frequently Asked Questions (FAQs)

What is Form 144 under the Income Tax Act 2025?

Form 144 is the quarterly TDS return filed by deductors to report Tax Deducted at Source on payments (other than salary) made to non-residents, including NRIs, foreign companies, and other non-resident persons. It replaces the earlier Form 27Q and is filed under Section 397(3)(b) of the Income-tax Act, 2025, governed by Rule 219 of the Income-tax Rules, 2026. The form covers payments such as interest, royalties, technical fees, dividends, professional fees, and capital gains on property purchases from NRIs.

What is the due date for filing Form 144 quarterly TDS returns?

Form 144 must be filed electronically within prescribed quarterly deadlines: 31st July for Q1 (April-June), 31st October for Q2 (July-September), 31st January for Q3 (October-December), and 31st May of the following financial year for Q4 (January-March). Late filing attracts a penalty of ₹200 per day under Section 427, capped at the total TDS amount deducted. Non-filing can result in penalties ranging from ₹10,000 to ₹1,00,000 under Section 461.

What is Section 393(2) and how does it relate to Form 144?

Section 393(2) [Table: Serial No. 17] of the Income Tax Act 2025 is the restructured version of the earlier Section 195 of the Income Tax Act 1961. It mandates TDS deduction on payments made to non-residents if the income is chargeable to tax in India. Effective from 1st April 2026, this provision covers interest, royalty, technical fees, dividends, and any other sum chargeable under the Act (excluding salaries). All payments covered under Section 393(2) must be reported in Form 144 on a quarterly basis with no minimum threshold limit.

Can I apply DTAA benefits while filing Form 144?

Yes, Double Taxation Avoidance Agreement (DTAA) benefits can be applied when filing Form 144. If the non-resident payee's country has a tax treaty with India, the lower of the domestic rate or DTAA rate applies. To claim DTAA benefits, the non-resident must provide a valid Tax Residency Certificate (TRC) and Form 10F. In the Form 144 annexure, you must indicate that DTAA rates were applied and maintain supporting documents. From April 2026, CBDT circulars on DTAA application are mandatorily binding under Section 400(2).

Is there a threshold limit for TDS under Section 393(2) for non-resident payments?

No, there is no threshold limit for TDS deduction under Section 393(2) (earlier Section 195). Unlike domestic TDS provisions that have minimum exemption thresholds, TDS must be deducted on all taxable payments to non-residents from the very first rupee. Whether you pay ₹1,000 or ₹10 lakh to a non-resident, if the payment is chargeable to tax in India, TDS deduction and Form 144 filing are mandatory. This applies to all payment types including rent, professional fees, royalties, interest, and property purchases from NRIs.