Section 194E of the Income Tax Act, 1961, deals with Tax Deducted at Source (TDS) on payments made to non-resident sportsmen or sports associations. It applies to payments such as appearance fees, prize money, or participation fees made to non-resident individuals or entities engaged in sporting activities in India.

Applicability

Any person who

  • Pays money to a non-resident sportsman (including an athlete) or an entertainer (who is not an Indian citizen); or

 

  • Payment of money to a sports institution or an association will be referred u/s 115BBA is required to deduct tax u/s 194E.

 

  • Contributes articles or advertisements relating to any game in india in newspapers or magazines.

 Rate of TDS

 

  • The rate of tax deduction u/s 194E is 20% (including cess and surcharge) and the time of deduction is either at the time of credit of such income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or other modes).

Section 115BBA

  • This section provides a special tax rate @ 20% (not including cess), Plus Surcharge as applicable (if payment exceeds 1 crore) on specified income arising to a Non-Resident Sportsman or Entertainer or Sports Association.

Specified income includes income from participating in any games/ sports/ performance or income from advertising or income from contributing articles in the newspaper. All such income should arise only in India.

 

Return Filing

  • The Deductor, under section 194E of the Income Tax Act, 1961, is required to furnish TDS return in Form 27Q. The TDS return in form 27Q is to be filed on a quarterly basis within the following prescribed due dates –
  • April to June – 31st July
  • July to September – 31st October
  • October to December – 31st January
  • January to March – 31st May

Form 27Q Compliance Calendar (Visual Summary)

Quarter → Return Period → Due Date

  • Q1 (Apr–Jun) → Return covers Apr–Jun → 31 July

  • Q2 (Jul–Sep) → Return covers Jul–Sep → 31 October

  • Q3 (Oct–Dec) → Return covers Oct–Dec → 31 January

  • Q4 (Jan–Mar) → Return covers Jan–Mar → 31 May

What to prep before filing: challans, payee details (name, country, PAN if available), nature of income mapping to the section, and any DTAA paperwork (TRC, Form 10F) if relief is claimed. (DTAA note is general practice.)

Section 194E vs Section 195 — Quick Comparison

Purpose

  • Sec 194E: TDS on specified income paid to non-resident sportsmen/entertainers and sports associations for participation/appearance, prize money, advertising, or contributing articles arising in India.

  • Sec 195: TDS on other sums chargeable to tax in India paid to non-residents (e.g., royalty, FTS, professional fees, interest), when not covered by a special provision.

Trigger

  • 194E: Credit or payment (whichever earlier) of the above sports/entertainment income.

  • 195: Credit/payment of any sum chargeable to tax in India to a non-resident (subject to nature/chargeability tests).

Rate Logic

  • 194E: Special regime; article references 20% withholding and links taxability to Sec 115BBA (sports/entertainment income).

  • 195: Rate depends on nature of income under the Act and may be reduced if DTAA applies (with documentation).

Return/Form

  • Both: Form 27Q, filed quarterly on the due dates above.

DTAA Angle (practical)

  • 194E: Check if a treaty specifically addresses artistes/sportspersons; document eligibility before applying any beneficial rate.

  • 195: DTAA frequently influences the rate; obtain TRC + Form 10F and applicable declarations.

Case Study — IPL Prize Money to a Foreign Cricketer

Scenario:
An IPL franchise pays ₹50,00,000 as prize/appearance money to a non-resident cricketer for performances in India. This is specified sports income; taxability falls under Sec 115BBA, and withholding obligation under Sec 194E applies.

Compliance Walkthrough:

  1. Identify coverage: Participation/appearance/prize money to a non-resident sportsperson in India → Sec 194E scope.

  2. Withhold on credit/payment: Deduct TDS at the time of credit or payment, whichever is earlier.

  3. Illustrative TDS: ₹50,00,000 × 20% = ₹10,00,000 (illustrative; surcharge/cess or treaty relief may alter the effective figure).

  4. Deposit & report: Deposit TDS within timelines and report the transaction in Form 27Q for the relevant quarter (see calendar).

  5. Treaty check (if any): If claiming DTAA relief, collect TRC + Form 10F and ensure the article/treaty position supports a lower rate.

Bottom line: Under the article’s framing, Sec 194E applies with special sports income treatment via Sec 115BBA; use Form 27Q for quarterly reporting.

FAQs — Section 194E

1) Who must deduct TDS under 194E?
Any person paying non-resident sportsmen/entertainers or non-resident sports associations for participation/appearance, prize money, advertising, or articles arising in India must deduct TDS under Sec 194E.

2) What if TDS isn’t deducted on payments to foreign sportsmen?
Non-deduction can lead to interest, penalties, and disallowance risks under the Act. The payer should regularize by deducting and depositing TDS with applicable interest and reporting in Form 27Q for the correct quarter (general compliance guidance; the filing requirement is on your page).

3) Can DTAA benefits apply?
Potentially yes, depending on the treaty article (many treaties have special rules for artistes/sportspersons). If a beneficial rate is available and conditions are met, maintain TRC + Form 10F and other required evidence before applying it (general practice). The underlying special regime in Sec 115BBA still informs taxability for sports income referenced on your page

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