Which TDS Form Should Be Filed for Salary, Rent, Property, or NRI Payments?
- Pritish Sahoo
- 21 hours ago
- 9 min read
Choosing the correct TDS form is mandatory for salary payments, rent, property transactions, and payments made to NRIs under Indian tax law. Each payment category is governed by a specific section of the Income Tax Act, 1961, and requires a separate TDS return form for reporting and compliance. Filing the wrong form or missing timelines can result in penalties, interest, and loss of tax credit for the deductee. Understanding which TDS form applies to each transaction ensures accurate reporting, smooth reconciliation with Form 26AS and AIS, and avoids unnecessary notices from the tax department.
Table of Contents
Understanding TDS Forms Under the Income Tax Act, 1961
Tax Deducted at Source is a mechanism under the Income Tax Act, 1961, to collect tax at the time income is generated rather than at the time of filing returns. Depending on the nature of payment and the residential status of the payee, the Act prescribes different TDS sections and corresponding return forms. These forms act as statutory disclosures that link tax deductions with PAN, challans, and deductee details, ensuring that tax credits reflect correctly in Form 26AS and AIS. Filing the correct TDS form is not optional; it is a compliance requirement that directly affects both the deductor and the recipient.
TDS Form for Salary Payments Under Section 192
Salary income is governed by Section 192 of the Income Tax Act. Employers are required to deduct TDS based on the employee’s estimated annual taxable income after considering exemptions, deductions, and the applicable tax regime chosen by the employee.
Form 24Q is the prescribed quarterly TDS return for salary payments. This form captures employee-wise salary details, tax deducted, and challan information. It also enables the generation of Form 16, which serves as the salary TDS certificate and is essential for employees while filing their income tax returns. Failure to file Form 24Q correctly or on time may result in late filing fees and mismatches in the employee’s tax credit records.
Which TDS Form Applies to Rent Paid to Residents
Rent paid to resident individuals or entities is covered under Section 194I. This provision applies when the aggregate annual rent exceeds the prescribed threshold. The responsibility to deduct tax rests with the payer, except in specific cases where Section 194IB applies to individuals and HUFs paying higher monthly rent.
Form 26Q is the applicable quarterly TDS return for rent paid to residents. It is a non-salary TDS return and also applies to other payments such as professional fees, commissions, and contractual payments. After filing Form 26Q, the deductor must issue Form 16A to the landlord, enabling the landlord to claim TDS credit while filing the return.
TDS Form for Rent Paid to NRIs Under Section 195
Rent paid to non-resident individuals is governed by Section 195, which mandates tax deduction on any income chargeable to tax in India. Unlike resident rent, TDS on NRI rent is deducted at higher rates, typically inclusive of surcharge and cess, unless a lower deduction certificate is obtained.
Form 27Q is the mandatory TDS return for rent paid to NRIs. This form is exclusively used for payments to non-residents and foreign companies. Filing Form 26Q in such cases is incorrect and leads to compliance issues. After filing Form 27Q, Form 16A must be issued to the NRI landlord, allowing them to claim credit or seek a refund through their income tax return.
TDS Form for Property Purchase From a Resident Seller
When an immovable property is purchased from a resident seller, and the consideration exceeds the specified threshold, TDS is applicable under Section 194IA. This provision shifts the compliance burden to the buyer, even if the buyer is an individual with no other tax obligations.
Form 26QB is a challan-cum-statement specifically designed for such property transactions. Unlike other TDS forms, it is transaction-specific and does not require quarterly filing. The buyer must deposit the TDS and file Form 26QB within the prescribed timeline and issue Form 16B to the seller as proof of tax deduction.
TDS Compliance for Property Transactions Involving NRIs
Property transactions involving NRI sellers fall under Section 195. In such cases, the buyer is required to deduct TDS at rates applicable to capital gains, which are significantly higher than the rate applicable to resident sellers. The rate depends on whether the gain is short-term or long-term and may vary based on applicable surcharge and cess.
Form 27Q must be filed quarterly for property purchases from NRIs. Buyers often overlook this requirement or apply resident rules, which leads to major tax exposure. NRIs may apply for a lower or nil deduction certificate to reduce TDS, but until such approval is obtained, deduction at the applicable rate is mandatory.
Which TDS Form Is Required for Other NRI Payments
Apart from rent and property transactions, several other payments to NRIs, such as interest, royalties, technical service fees, and professional charges, are also covered under Section 195. Each of these payments requires tax deduction at rates prescribed under the Act or relevant tax treaties.
Form 27Q is the only valid TDS return for all such NRI payments. It ensures correct tagging of non-resident status, foreign remittance details, and applicable tax rates. Any excess TDS deducted can be claimed by the NRI by filing an income tax return in India.
Key Differences Between Form 24Q, 26Q, 26QB, and 27Q
Each TDS form serves a distinct purpose and cannot be substituted interchangeably. Form 24Q is exclusively for salary payments. Form 26Q applies to non-salary payments made to residents. Form 26QB is transaction-based and limited to property purchases from resident sellers. Form 27Q is mandatory for all payments made to non-residents, regardless of the nature of the income.
Using the wrong form often leads to invalid filings, delayed credits, and automated notices. Understanding these differences is essential for accurate tax compliance.
TDS Filing Timelines, Certificates, and Common Errors
TDS returns are generally filed on a quarterly basis, except for Form 26QB, which is filed per transaction. Delays attract late filing fees and interest, which continue to accrue until compliance is completed.
Common errors include incorrect PAN details, wrong selection of TDS form, mismatched challan entries, and failure to issue TDS certificates, such as Form 16 or Form 16A. These mistakes directly impact the deductee’s ability to claim a tax credit and often trigger follow-up notices from the tax department.
How TaxBuddy Simplifies TDS Compliance and Return Filing
Managing TDS compliance becomes increasingly complex as the number of payment types grows. Salary deductions follow a quarterly reporting cycle, rent payments may fall under different sections based on the payee’s residential status, property transactions often involve one-time filings with strict timelines, and NRI payments attract higher scrutiny under Section 195. Handling each of these in isolation increases the risk of selecting the wrong TDS form, missing due dates, or creating data mismatches that later surface as notices.
TaxBuddy simplifies this complexity by structuring TDS compliance around the nature of the transaction rather than manual form selection. Each payment is mapped to the appropriate TDS section and corresponding return form, whether it is Form 24Q for salary, Form 26Q or 26QB for resident payments, or Form 27Q for non-resident transactions. This automated classification helps ensure that deductions are reported under the correct legal framework from the outset.
Validation plays a critical role in accurate TDS filing, and TaxBuddy integrates checks for PAN correctness, challan details, and deduction rates before submission. These validations reduce common errors such as incorrect PAN tagging, challan mismatches, or reporting under the wrong quarter, all of which can delay credit reflection in Form 26AS and AIS. By addressing these issues at the filing stage, downstream corrections and follow-up filings are largely avoided.
Another key advantage is the integration of TDS compliance with income tax return filing. Instead of treating TDS as a standalone task, TaxBuddy aligns the deducted tax with the final return computation. This ensures that salary income, rental income, capital gains, and NRI income reported in the return correspond exactly with the TDS data uploaded through quarterly filings. Such alignment significantly lowers the chances of mismatches during automated return processing.
Timelines and post-filing obligations are also managed within a single workflow. Due dates for TDS returns, issuance of TDS certificates such as Form 16 and Form 16A, and correction windows are tracked systematically. This reduces the risk of late filing fees and interest while ensuring deductees receive their certificates on time for return filing.
By combining transaction mapping, validation controls, and return-level reconciliation, TaxBuddy offers a structured approach to TDS compliance. This end-to-end handling not only simplifies day-to-day compliance but also strengthens accuracy and consistency across filings, helping taxpayers and businesses maintain clean records and avoid unnecessary notices.
Conclusion
TDS compliance is not limited to deducting tax; it also requires selecting the correct return form, filing it within time, and issuing the appropriate certificates. Salary, rent, property transactions, and NRI payments each follow different rules under the Income Tax Act, 1961, and errors in form selection can lead to penalties and credit mismatches. For taxpayers and businesses looking to manage these obligations efficiently, downloading the TaxBuddy mobile app offers a simplified, secure, and hassle-free way to handle TDS compliance and income tax return filing.
FAQs
Q1. How is the correct TDS form determined for a payment?
The correct TDS form depends on two factors: the nature of the payment and the residential status of the payee. Salary payments use a different form than rent or professional fees, and payments to NRIs always require a separate reporting format. Selecting the form based only on payment amount often leads to errors; the underlying TDS section must always be checked first.
Q2. Which TDS form should be filed for salary paid to employees?
TDS deducted on salary under Section 192 must be reported using Form 24Q. This form is filed quarterly by the employer and forms the basis for issuing Form 16 to employees. Salary payments should never be reported in Form 26Q or Form 27Q.
Q3. What TDS form applies to rent paid to a resident landlord?
Rent paid to a resident landlord is generally covered under Section 194I and must be reported using Form 26Q. This applies to individuals, firms, and companies making rent payments above the prescribed threshold. After filing Form 26Q, Form 16A must be issued to the landlord.
Q4. Is a different TDS form required for rent paid to an NRI?
Yes. Rent paid to an NRI falls under Section 195 and must be reported using Form 27Q. Using Form 26Q for NRI rent is incorrect and may result in invalid filings and TDS credit mismatches for the landlord.
Q5. Which TDS form is applicable when purchasing property from a resident seller?
When property is purchased from a resident seller, and TDS is applicable under Section 194IA, Form 26QB must be filed. This is a challan-cum-statement filed per transaction and does not follow the quarterly TDS return system.
Q6. What is the correct TDS form for property purchased from an NRI?
Property purchases from NRI sellers fall under Section 195, and TDS must be reported using Form 27Q. The buyer is responsible for deducting and depositing TDS at applicable capital gains rates and filing quarterly returns.
Q7. Which TDS form applies to other payments made to NRIs, such as interest or professional fees?
All payments to NRIs, excluding salary, are covered under Section 195 and must be reported using Form 27Q. This includes interest income, royalties, consultancy fees, and technical service charges.
Q8. Can Form 26Q and Form 27Q be combined in a single TDS return?
No. Resident payments and non-resident payments must be reported separately. Form 26Q is strictly for resident non-salary payments, while Form 27Q is exclusively for non-resident payments. Combining them leads to filing errors and rejected statements.
Q9. What are the consequences of filing the wrong TDS form?
Filing the wrong TDS form can lead to late filing fees, interest, invalid returns, and incorrect reflection of TDS credit in Form 26AS and AIS. In many cases, correction statements are required, increasing compliance time and cost.
Q10. Are TDS certificates mandatory after filing TDS returns?
Yes. After filing Form 24Q, employers must issue Form 16 to employees. After filing Form 26Q or Form 27Q, Form 16A must be issued to the deductee. These certificates are essential for claiming TDS credit while filing income tax returns.
Q11. How does correct TDS form selection impact Form 26AS and AIS?
Correct form selection ensures that TDS credits are accurately reflected against the deductee’s PAN in Form 26AS and AIS. Incorrect reporting often results in missing or mismatched credits, which can trigger automated notices during return processing.
Q12. How does TaxBuddy help in selecting and filing the correct TDS form?
TaxBuddy simplifies TDS compliance by mapping each payment to the correct TDS section and return form, validating PAN and challan details, and tracking filing timelines. This reduces the risk of incorrect filings and helps ensure that TDS credits flow correctly into income tax returns.
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