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What are the TDS rates applicable to NRIs?

This article provides a ready-reckoner list of Tax Deduction at Source (TDS) rates applicable to NRIs for their income in India.

What are the TDS rates applicable to NRIs?


Posted on 21 Jul 2024
Author: Sayan Sircar
6 mins read
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This article provides a ready-reckoner list of Tax Deduction at Source (TDS) rates applicable to NRIs for their income in India.

What are the TDS rates applicable to NRIs?

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Why should TDS apply to NRIs?

Tax Deduction at Source (TDS) is the income tax which is deducted before the income is given to you.

A classic example is a bank deducting the due tax on interest before sending the interest to your account.

This way, it becomes your responsibility to file an income tax return (ITR) and reclaim the TDS amount if more than what you actually need to pay has been deducted.

For NRIs, TDS applies to every income source in India except NRE FDs.

What is Section 195 which applies to NRIs?

Section 195, which covers TDS, applies to NRIs having income from India from multiple sources:

  • interest from bank deposits or bonds, or stock dividends
  • short-term capital gains
  • long-term capital gains from shares and bonds
  • long-term capital gains from real estate
  • selling real estate (including land)
  • other long-term capital gains
  • and a few more

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When is TDS due?

TDS is due at the point of receiving income (interest, dividends, rent) or at the time of realisation of capital gains on shares, mutual funds, houses, etc.

Failure to deduct TDS, for example by the tenant, will lead to penalties.

What are the TDS rates applicable to NRIs?

There are no lower thresholds for these TDS limits for NRIs unlike, say, real estate where TDS (that too only 1%) kicks in only if the property is more expensive than 50 lakhs.

If tenants and real estate buyers don’t declare and deposit TDS on the income tax website, they will face interest and penalties.

Income source Rate Section Who deducts?
Shares 10% 112A Brokerage
Bonds (corporate / gilt / state) 10%   Company / Issuer
Company FD 10%   Company / Issuer
Equity-oriented mutual funds 10% 112A AMC
Business Trusts like REIT / InvIT 10% 112A Company
Short-term Capital Gains 15% 111A AMC / Company
Debt-oriented mutual funds 20%   AMC
Any other LTCG 20%   Buyer
Coupon from bonds 30% 115E Company / Issuer
NRO Interest 30% 115E Bank
NRO FD maturity (interest only) 30% 115E Bank
Dividends from stocks / REITs 20% 115E Company
Dividends from Mutual Funds 20% 115E AMC
Property Sale (held less than 24 months) 30% (short-term)   Buyer
Property Sale (held more than 24 months) 12.5% (long-term)   Buyer
Rent 30%   Tenant
Other income 30%   Whoever gives money

These TDS rates are designed in a way that they are the same or higher than the actual tax due.

Remember: NRE FDs are tax-free in India and do not have TDS.

Related:
NRIs: How to File Your Income Tax Return on Rental Income from Indian Property

Also read
How to make a health insurance claim that ensures you get back the claimed amount?

How much cess applies to TDS?

A cess of 4% applies to all TDS figures. With cess, the TDS figures become:

TDS Rate With 4% cess With 10% surcharge + 4% cess
10% 10.40% 11.44%
12.5% 13.00% 14.30%
15% 15.60% 17.16%
20% 20.80% 22.88%
30% 31.20% 34.32%

Note: 10% Surcharge is applicable only if taxable income exceeds ₹50 lakhs and is interpreted as a tax-on-tax. Surcharge rate increases further after ₹1 crore (1-2 cr = 15% surcharge, 2-5 cr = 25% surcharge, 5cr+ 37% surcharge)

Can TDS rate applicable to the NRI be lowered?

There is a provision to lower the TDS by applying for a Lower Deduction Certificate by filling Form 13. We have covered the details here: FAQs for NRIs for applying for Lower Deduction Certificate by filling Form 13

What should NRIs do to get a TDS refund?

Conceptually, TDS is exactly the same as the tax a company deducts before paying you a monthly salary.

NRIs have two options here to get back excess TDS, and both of them involve filing the Income Tax Return (ITR) by 31st July in India. TDS details will be captured in Form 26AS, available from the TRACES website.

There are two implications of filing ITR:

  • if TDS is more than the actual tax on all income (as per the tables above) then the NRI gets a refund
  • if the TDS is less than the actual tax due, you will get a refund
  • you might need to pay tax in your home country as well. If any tax has been paid already, then under the Double Taxation Avoidance Agreement (DTAA), you will get a tax credit in your home country.

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This post titled What are the TDS rates applicable to NRIs? first appeared on 21 Jul 2024 at https://arthgyaan.com


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