Complete Guide to Income Tax Form 129 for Non-Resident Payments

With the introduction of the Income-tax Act, 2025, the mechanism for determining tax deduction at source (TDS) on payments made to non-residents has been overhauled. Form No. 129 is now the central compliance tool for payers seeking a lower or nil TDS certificate for remittances (other than salary) to non-residents and foreign companies.

This guide explains the legal framework, eligibility, documentation, procedural steps, and practical aspects of using Form No. 129 under section 395(2) and section 400(3) of the Income-tax Act, 2025, along with the relevant Rules under the Income-tax Rules, 2026.

1.1 Statutory basis

Form No. 129 has been notified under:

  • Section 395(2) and Section 400(3) of the Income-tax Act, 2025
  • Rule 214 and Rule 220 of the Income-tax Rules, 2026

It replaces the earlier Form No. 15E that existed under the Income-tax Act, 1961 and the Income-tax Rules, 1962, which were linked to:

  • Section 195(2) and Section 195(7) of the Income-tax Act, 1961
  • Rule 29BA and Rule 37BB of the Income-tax Rules, 1962

Note: References to section 195(2) and section 195(7) are now aligned to section 395(2) and section 400(3) in the restructured legislation effective from 2025 onwards.

1.2 Purpose of Form No. 129

Payments to non-residents or foreign companies are generally subject to TDS under section 395. However:

  • The entire gross payment is not always taxable in India, and
  • A lower tax rate may apply where a Double Taxation Avoidance Agreement (DTAA) is in force.

Form No. 129 allows the payer (assessee) to:

  1. Approach the Assessing Officer (AO) before remittance;
  2. Seek determination of the portion of the sum chargeable to tax in the hands of the non-resident recipient; and
  3. Obtain a certificate permitting deduction of tax at a lower or nil rate on such payment.

This ensures that TDS is aligned with the actual taxability under the Income-tax Act, 2025 and any applicable DTAA, thereby preventing excessive or unwarranted deduction.

2. Who Can Use Form No. 129?

2.1 Eligible applicants

Under section 395(2) and section 400(3) read with Rule 220, Form No. 129 can be filed by:

  1. Any person (payer/assessee) responsible for making a payment (other than salary) to:

    • A non-resident individual (not being a company), or
    • A foreign company,
      where such amount is chargeable to tax under the Act, and the payer seeks to determine the appropriate tax deduction before remittance.

  2. Persons or classes of persons as may be notified by CBDT under section 400(3) who are responsible for remitting sums to non-residents or foreign companies, even where the sum may or may not be chargeable to tax, but the CBDT mandates prior determination of tax liability before remittance.

2.2 When filing is relevant

Use of Form No. 129 is particularly relevant where:

  • Only a fraction of the payment is taxable in India (e.g., mixed contracts with offshore and onshore components).
  • A DTAA reduces the TDS rate below the domestic law rate.
  • The assessee wants to avoid blocking of funds due to high TDS on amounts that may later be refunded.

3. Is Form No. 129 Mandatory?

  • Legally, filing Form No. 129 is not compulsory in all cases.
  • However, it becomes functionally necessary if the payer intends to:
    • Deduct tax at a rate lower than that prescribed under the Income-tax Act, 2025, or
    • Deduct no tax where the transaction is claimed to be not chargeable to tax in India.

If Form No. 129 is not filed, the payer generally must deduct TDS as per the default rates mandated under section 395(2).

4. Time of Filing and Frequency

4.1 Time limit for filing

There is no explicit statutory deadline specified for Form No. 129. However:

Critical condition: Form No. 129 must be filed before the remittance is made outside India.

If the remittance is completed without a certificate, the payer is exposed to TDS obligations at the full applicable rate under the Act.

4.2 How often can Form No. 129 be filed?

  • Form No. 129 is an event-based form.
  • There is no cap on the number of times an assessee can file Form No. 129 in a tax year.
  • A separate application may be made:
    • For each distinct transaction, or
    • For a series of remittances to the same non-resident recipient, depending on how the AO structures the certificate.

5. Structure and Contents of Form No. 129