If your business remits money to non-residents – royalties, technical or professional service fees, interest, dividends, or management charges – the shift from the Income-tax Act, 1961 (ITA 1961) to the Income-tax Act, 2025 (ITA 2025) will change how you stay compliant from 1 April 2026 onwards.
The headline: tax rates have not changed. Withholding obligations have not changed. The treaty benefit framework has not changed. What has changed is the section numbering, form names, information requirements, and one genuinely consequential procedural shift — the window to correct TDS returns has been cut from 6 years to just 2 years.
This post walks through each change, what it means practically, and what your finance and tax teams need to do before the first payment on or after 1 April 2026.
What Is ITA 2025 and Why Does It Matter for TDS?
The Income-tax Act, 2025 replaces the Income-tax Act, 1961 entirely from 1 April 2026. This is a structural rewrite of the law — cleaner drafting, consolidated provisions, tabular presentation — not a policy change.
For entities making payments to non-residents, the key reference points shift as follows:
| Area | Until 31 March 2026 | From 1 April 2026 |
|---|---|---|
| Governing law | ITA 1961 / ITR 1962 | ITA 2025 / ITR 2026 |
| Core TDS provision | Section 195(1) | Section 393(2) [Table: Sl. No. 17] |
| Treaty (DTAA) docs | Section 90(4)/(5), Rule 21AB, Form 10F | Section 159(8), Rule 75, Form 41 |
| Pre-remittance reporting | Section 195(6), Rule 37BB, Forms 15CA and 15CB | Section 397(3)(d), Rule 220, Forms 145 and 146 |
| Quarterly TDS return | Section 200(3), Rule 31A, Form 27Q | Section 397(3)(b), Rule 219, Form 144 |
| Correction window | 6 years from end of relevant FY | 2 years from end of relevant Tax Year |
Five areas deserve close attention.
1. Claiming Treaty (DTAA) Benefits -Form 10F Replaced by Form 41
When a non-resident payee is entitled to a reduced withholding rate or an exemption under a tax treaty (DTAA), two conditions must be met: (a) the non-resident must furnish a Tax Residency Certificate (TRC) issued by the government of its country of residence, and (b) it must provide additional information and documents as prescribed.
Both conditions carry forward under ITA 2025. What changes is the detail behind condition (b).
Structural consolidation: Under ITA 1961, treaty provisions were spread across Section 90 (agreements with foreign countries) and Section 90A (agreements between specified associations). ITA 2025 merges both into a single Section 159. For most corporate taxpayers, this is a housekeeping change with no practical impact.
TRC requirement — unchanged: The requirement to hold a valid TRC from the payee’s country of residence as a pre-condition for claiming treaty relief is carried forward from Section 90(4) to Section 159(8)(a) without any change in substance.
Form 10F replaced by Form 41 — significant expansion: The self-declaration form filed by the non-resident payee alongside the TRC changes from Form 10F (Rule 21AB, ITR 1962) to Form 41 (Rule 75, ITR 2026). This is now a mandatory condition for claiming DTAA benefit. Importantly, the earlier exemption from filing this form when the TRC already contained all prescribed information does not find a place in the new rules.
Form 41 is considerably more detailed and is designed for online filing with pre-filled fields. Here is what is new:
| Information Item | Form 10F (Old) | Form 41 (New) |
|---|---|---|
| Nationality / Country of Residence | Individual — Nationality required | Requires Country of Residence |
| Communication address in India | Not required | Required, if available |
| Email ID | Not required | Required |
| Contact number with country code | Not required | Required |
| TRC upload | Required as attachment | Required — TRC to be uploaded as Annexure |
| Pre-filled fields from income-tax portal | No | Yes — designed for digital pre-filling |
Action needed: Indian payers should contact their overseas vendors, group companies and licensors to collect the e-filed Form 41 with the additional information — India communication address, email ID, and contact number with country code.
Note on annual filing: CBDT FAQs clarify that Form 41 must be filed once per tax year by a non-resident. This raises open questions for non-residents who follow a different tax year in their country of residence (and may have two TRCs covering one Indian tax year), and for situations where particulars like name or address change mid-year.
2. Pre-Remittance Reporting – Forms 15CA and 15CB Replaced by Forms 145 and 146
Before remitting any sum overseas, the payer must file an information form with the income-tax department and submit it to the bank (authorised dealer) prior to remittance. This requirement continues under ITA 2025. What changes is the form number and its content.
The Framework – Same Four Parts, Same Thresholds
Both old Form 15CA and new Form 145 have four parts triggered by the same thresholds:
| Part | When Applicable | Old Form | New Form |
|---|---|---|---|
| A | Taxable remittance, aggregate up to Rs. 5 lakh in the year | Form 15CA — Part A | Form 145 — Part A |
| B | Taxable remittance, aggregate above Rs. 5 lakh, AO certificate obtained | Form 15CA — Part B | Form 145 — Part B |
| C | Taxable remittance, aggregate above Rs. 5 lakh, CA certificate obtained | Form 15CA — Part C + Form 15CB | Form 145 — Part C + Form 146 |
| D | Remittance not chargeable to tax | Form 15CA — Part D | Form 145 — Part D |
Form 15CB Replaced by Form 146 — Key Changes for the CA Certificate
The accountant’s certificate (Form 15CB) is replaced by Form 146. The purpose remains the same — an independent certification of the nature and taxability of the remittance. Form 146, however, brings in several additional requirements:
| Requirement | Form 15CB | Form 146 |
|---|---|---|
| UDIN (Unique Document Identification Number — ICAI) | Not required | Optional (as per online form) |
| TIN of remittee; Principal place of business | Not required | Required — new fields |
| Email ID, Contact number with country code, TRC certificate number | Not required | Mandatory |
| Capital gains computation | Not required | Mandatory |
| ITDREIN of bank | Not required | Optional (as per online form) |
| Rate of TDS mentioned separately for taxability as per IT | Not required | Mandatory |
Important transition rule: For remittances made on or after 1 April 2026, ITA 2025 provisions apply. Form 146 is required for all such remittances, regardless of when the tax was deducted — including cases where deduction happened before 1 April 2026.
All payers should begin collecting remittee details — email ID, contact number with country code, and principal place of business — as a standard practice now.
Authorised Dealer Quarterly Reporting – Form Numbers Updated
Banks and IFSC Units that facilitate overseas remittances continue to file a quarterly statement with the income-tax department. The form numbers change; timelines remain unchanged (within 15 days of the end of each quarter).
| Category | Old Form | New Form |
|---|---|---|
| Authorised Dealer (bank) | Form 15CC | Form 147 |
| IFSC Unit | Form 15CD | Form 148 |
3. Quarterly TDS Return for Non-Resident Payments – Form 27Q Becomes Form 144
All deductors withholding TDS on non-salary payments to non-residents (and to Residents but Not Ordinarily Resident — RNOR) must file a quarterly TDS return. This was Form 27Q under ITR 1962; it is Form 144 under ITR 2026. The filing obligation and due dates are unchanged. The differences are operational:
| Aspect | Form 27Q (Old) | Form 144 (New) |
|---|---|---|
| Terminology | “Financial Year” | “Tax Year” — same period, new label |
| Section codes for NR payments | Section numbers like 195 | 4-digit numeric codes — e.g., “1057” for NR payment (equivalent of old “195”) |
| No-deduction / lower-deduction codes | Alphabetic codes: “A” (Section 197 certificate), “D” (206AA higher rate) | Revised codes, new ones added |
| Nature of remittance categories | Derived from section code | New 19-category dropdown — covers capital gains, FTS, royalty, dividends, interest, winnings, and more |
| Late filing fee reference | Section 234E — Column 706 | Section 427 — Column (D) |
| Portal reference | TIN/TRACES | TIN 2.0 / TRACES portal |
This change has high operational impact. ERP systems, payroll software and TDS return preparation tools must be updated with the new 4-digit section codes before the first quarterly filing for Tax Year 2026-27 (due 31 July 2026).
4. Tax Withholding Obligation – No Change in Substance
There have been no changes to the tax withholding obligation itself. The rate of TDS, the trigger for withholding, the grossing-up mechanics, and the nil/lower certificate process all continue as before — just under new section numbers:
- Section 195(1) becomes Section 393(2) [Table: Sl. No. 17]
- Section 195(2)/(3) becomes Section 395(1)/(2)
- Form 13 becomes Form 128; Form 15E becomes Form 129
5. Correction of TDS Statements – Window Reduced from 6 Years to 2 Years
This is the most consequential procedural change for deductors in this entire transition.
Under ITA 1961 (Section 200(3)), a deductor had up to 6 years from the end of the relevant financial year to file a correction statement for a TDS return. Under ITA 2025 (Section 397(3)(f)), that window is just 2 years from the end of the relevant Tax Year.
| Old Law (ITA 1961) | New Law (ITA 2025) | |
|---|---|---|
| Correction right | File to rectify mistakes, add, delete or update information | Same right, drastically shorter window |
| Time limit | 6 years from end of relevant FY | 2 years from end of relevant Tax Year |
To put this in perspective:
| Statement | Relevant Period | Final Correction Cut-off |
|---|---|---|
| Form 27Q Q1 FY 2025-26 (due July 2025) | FY 2025-26 | 2 years as per TRACES portal advisory — correction statements for FY 2024-25 Q4 / FY 2025-26 initiated after 1 April 2026 will be time-barred after 2 years from end of FY |
| Form 144 Q1 Tax Year 2026-27 (due 31 July 2026) | TY 2026-27 | 31 March 2029 |
Under the old law, the 6-year window was routinely used to resolve PAN mismatches, TDS credit disputes, and omissions discovered during assessments. Under ITA 2025, returns for Tax Year 2026-27 onwards must be filed correctly the first time. Mismatches not corrected within two years will be difficult to rectify and may result in unresolved TDS credit issues for payees.
Action Points for Indian Businesses
1. Collate additional data for Form 41. Collect India communication addresses, email IDs, and contact numbers with country codes from all overseas vendors, group companies and licensors. This data was not required under Form 10F and must now be part of Form 41.
2. Update ERP and TDS return software. New 4-digit section codes (Form 144), new form numbers (145, 146, 144, 147, 148), and the “Tax Year” reference must all be updated in payroll, ERP and TDS return preparation systems before the first payment on or after 1 April 2026.
3. Review CA certification workflows. Form 146 requires UDIN, FRN and Member Registration Number as mandatory fields. CAs should ensure ICAI details are current. If an AO certificate (Part B) is available for recurring payments, the CA certificate under Part C / Form 146 is no longer required — a simplification worth leveraging.
4. Prioritise accuracy in Form 144 from the outset. With the correction window down to two years, errors must be caught quickly. Establish a quarterly reconciliation process to verify PAN/TIN data, section codes and TDS amounts before each quarterly filing deadline.
5. Manage the transition period carefully. TDS deducted on or before 31 March 2026 remains governed by the old law — use Form 27Q, old section codes, old form numbers. TDS deducted on or after 1 April 2026 falls under ITA 2025 — use Form 144 and new forms. Both regimes will run in parallel during FY 2026-27 transition filings.
6. Monitor CBDT notifications. Rule 220(4) of ITR 2026 provides that the Director General of Income-tax (Systems) will separately specify procedures and standards for electronic filing of Form 145. Watch for these notifications to keep filing workflows aligned with the portal’s implementation.
Frequently Asked Questions
What is the difference between Form 15CA and Form 145?
Form 145 is the direct replacement for Form 15CA under ITA 2025, effective from 1 April 2026. Both forms serve the same purpose — pre-remittance reporting to the income-tax department before any overseas payment is made. Form 145 retains the same four-part structure and the same thresholds as Form 15CA but includes additional data fields such as TIN of the remittee, IFSC details, and sub-codes.
Has the TDS rate on payments to non-residents changed under ITA 2025?
No. The rate of TDS on payments to non-residents has not changed under ITA 2025. The withholding obligation, rates, thresholds, grossing-up mechanics, and the nil/lower certificate process all continue as before. The changes are structural — primarily new section numbers and revised form names.
What replaces Form 10F for claiming DTAA benefits from 1 April 2026?
Form 10F has been replaced by Form 41 under Rule 75 of ITR 2026. Form 41 is more detailed than its predecessor, requiring additional information including the non-resident’s India communication address, email ID, and contact number with country code. It is designed for online filing with pre-filled fields from the income-tax portal. CBDT has clarified that Form 41 must be filed once per tax year.
What is the new correction window for TDS returns under ITA 2025?
Under ITA 2025 (Section 397(3)(f)), the correction window for TDS returns is 2 years from the end of the relevant Tax Year — a significant reduction from the earlier 6-year window under ITA 1961. This applies to Form 144 (which replaces Form 27Q) for Tax Year 2026-27 onwards.
What happens to TDS deducted before 1 April 2026?
TDS deducted on or before 31 March 2026 continues to be governed by ITA 1961. The old forms (Form 27Q, Forms 15CA/15CB) and old section codes apply. TDS deducted on or after 1 April 2026 falls under ITA 2025, and the new forms (Form 144, Forms 145/146) and new section codes must be used. Both regimes run in parallel during the FY 2026-27 transition period.
What is Form 146 and who needs to file it?
Form 146 replaces Form 15CB as the accountant’s certificate for overseas remittances. It is required when the aggregate remittance exceeds Rs. 5 lakh and a CA certificate is obtained (Part C of Form 145). Form 146 includes several new mandatory fields compared to Form 15CB — including the remittee’s TIN, principal place of business, email ID, contact number, TRC certificate number, capital gains computation, and the applicable TDS rate.
Does the DTAA treaty benefit framework change under ITA 2025?
The substantive framework for claiming treaty benefits does not change. The requirement to hold a valid Tax Residency Certificate (TRC) is carried forward unchanged. What changes is the self-declaration form — from Form 10F to the more detailed Form 41 — and the consolidation of treaty provisions into a single Section 159 (previously split between Sections 90 and 90A).
What are the new quarterly TDS return requirements for non-resident payments?
Form 27Q is replaced by Form 144 under ITA 2025. The filing obligation, due dates, and scope (all non-salary payments to non-residents and RNORs) remain the same. Key operational changes include a shift to 4-digit numeric section codes, a new 19-category remittance dropdown, revised no-deduction codes, and migration to the TIN 2.0 / TRACES portal.
When should Indian businesses start preparing for these changes?
Immediately. The changes take effect from 1 April 2026, which means the first quarterly TDS return under Form 144 is due 31 July 2026. ERP and TDS software must be updated before the first payment on or after 1 April 2026. Additionally, Form 41 collection from overseas payees should begin right away, as this data will be required for any remittances made from 1 April 2026 onwards.
What are the consequences of not correcting Form 144 errors within 2 years?
Errors in Form 144 not corrected within 2 years from the end of the relevant Tax Year cannot be rectified under ITA 2025. This can result in unresolved TDS credit issues for the non-resident payee, potential PAN/TIN mismatches, and possible compliance exposure for the deductor. It is strongly advisable to establish quarterly reconciliation processes to catch and correct errors well within the two-year window.
Conclusion
The transition from ITA 1961 to ITA 2025 is not a tax policy overhaul — it is a structural migration. But “structural” does not mean frictionless. For businesses making payments to non-residents, the practical to-do list is real: collect Form 41 data from overseas payees, update ERP and TDS software with new section codes and form numbers, review CA certification workflows, and build tighter quarterly reconciliation processes.
The single most important operational takeaway is the correction window change. With just 2 years to correct TDS return errors instead of 6, the margin for error in Form 144 filings is far narrower. Getting it right the first time is no longer best practice — it is a compliance requirement.
About M2K Advisors
M2K Advisors is an international tax advisory firm having offices in India, Singapore, USA & UAE. Our firm offers Tax advisory, GST & sales tax compliances, FEMA & corporate law compliance & transfer pricing solutions across multiple geographies. Whether you are an MNC managing complex cross-border tax structures, an NRI requiring income tax compliance, or a business planning to setup operations in India, Singapore, the USA, or the UAE, our expert team provides comprehensive and seamless support across jurisdictions. With deep expertise in mergers and acquisitions, company valuation, due diligence, and succession planning, M2K Advisors is your global strategic partner in building, growing, and scaling businesses across borders.
To know more on how these changes affect your specific situation, reach out to M2K Advisors at knowledge@m2k.co.in, mukesh@m2kadvisors.com
