TDS payment code query

1004......          

Thanks Sir.

In that case the deductor has to file the tds return in form 144 (27Q) and not form 138 (24Q) as form 138 does not support code 1004. 

However Form 138 is the quarterly TDS return for salaries.

Please advise.

Regards,

CA Dipjyoti Majumdar

A non-executive or independent NRI director typically isn't an employee of the company in the traditional sense. They're compensated through sitting fees for attending board meetings, or through commission tied to profits, rather than a monthly salary. This isn't "salary" for tax purposes — it's a payment for services, and it falls squarely within Section 195's scope as a sum chargeable to tax in India, paid to a non-resident.

For salary payments to an NRI executive director: TDS deducted under Section 192, deposited via the standard TDS challan process, reported quarterly through Form 24Q, with Form 16 issued to the director at year-end — the identical process used for any resident employee, just with the added residency-and-source analysis under Section 9(1)(ii) determining how much of it is taxable at all.

For sitting fees or commission to a non-executive NRI director: TDS deducted under Section 195, Form 15CA filed before remittance (with Form 15CB from a CA where required), TDS deposited by the standard due date, and reported quarterly through Form 27Q, with Form 16A issued rather than Form 16.

Missing the correct filing track — whether that's skipping Form 15CA/15CB for a fee-based director, or unnecessarily routing a genuinely salaried executive director's pay through the Section 195 remittance process — creates avoidable friction, either in the form of a Section 271-I penalty for the missing 15CA/15CB filing, or in the form of disallowed expenses under Section 40(a)(i) if the wrong TDS section is applied and challenged later.

For NRI director's fees and compensation ...

Select 1004 from the filtered dropdown.

File the transaction using Form 144 (the non-resident statement). Do not file it in Form 138, as Form 138 is designed for resident payroll entries and will reject code 1004.

Thanks Sir for detailed deliberations.

In this case, the non resident MD has now obtained PAN in India.

So while paying TDS in portal, should the payee be categorised under 'resident deductee' or 'non-resident deductee' please..

Regards

CA Dipjyoti Majumdar

Residential status does not depend upon having PAN ot not. It has to be decided upon his/her stay in INDIA. The code for NRI remains 1004. If it is salary it can be paid under FORM 138, but such fees are categorised under fees or compensation and paid under form 144 ...