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What are the TDS rates applicable to NRIs?

Posted on 21 Jul 2024
Author: Sayan Sircar

Tags: NRI ; Tax

10 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?

This article is a part of our detailed article series on the concept of taxes to be paid by NRIs in India. Ensure you have read the other parts here:

NRI Taxes in India: Your Guide to Income, Capital Gains and DTAA

This guide simplifies the rules for income earned in India and abroad, including taxability, exemptions and DTAA application.

NRI Guide: Save on Crores in Capital Gains Tax with Sections 54, 54EC, and 54F in India

This article explains the benefits of Section 54, 54EC and 54F for NRIs looking to buy and sell real-estate in India.

TCS and TDS on Transfers to NRO Accounts: Rules, Tax Implications and Exemptions

This article deals with complex taxation rules around NRO and NRE accounts and how TDS and TCS applies to them.

NRE vs. NRO Accounts for Real Estate: Tax & Repatriation Explained

This guide breaks down how these accounts handle rental income, property sales, and capital gains. Learn how TDS applies, whether DTAA helps avoid double taxation, and how to legally repatriate funds abroad.

Understanding RNOR Tax Status in India: Key Rules and Tax Obligations Explained

This guide covers when NRIs become RNORs, what taxes they must pay on Indian and foreign income, and how to take advantage of Double Taxation Avoidance Agreements (DTAA).

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

NRIs must file your income tax return on rental income from Indian property the right way. Learn about the tax deductions you can claim and how to file your return without hassles.

📚 Table of Contents

Why should TDS apply to NRIs?
What is Section 195 which applies to NRIs?
When is TDS due?
What are the TDS rates applicable to NRIs?
How much cess applies to TDS?
Can TDS rate applicable to the NRI be lowered?
What should NRIs do to get a TDS refund?

Why should TDS apply to NRIs?

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

A classic example of TDS 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.

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What is Section 195 which applies to NRIs?

Section 195 mandates that any person making a payment to an NRI must deduct TDS first on any income that is chargeable to tax like

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

Both non-deduction and late submission of the TDS with the Income Tax authorities can lead to interest, penalties and even imprisonment. If you are a individual tax payer, you must take a Tax Deduction and Collection Account Number (TAN) to deduct TDS in case your landlord is an NRI.

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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?

Income Source ↑↓	Rate ↑↓	Section ↑↓	Who Deducts? ↑↓
Shares (LTCG - Section 112A)	12.5% (above 1.25 lakh)	112A	Brokerage firms/Companies
Bonds (corporate/gilt/state)	Varies (check specific bonds)	195	Company/Issuer
Company FD	As per applicable income tax slab rates or 30%, whichever is applicable.	195	Company/Issuer
Equity-oriented mutual funds (LTCG - 112A)	12.5% (above 1.25 lakh)	112A	Asset Management Company (AMC)
Business Trusts (REITs/InvITs) - LTCG	12.5% (above 1.25 lakh)	112A	Company distributing the income
Short-term Capital Gains (Section 111A)	15%	111A	AMC/Company/Brokerage Firms
Debt-oriented mutual funds	As per applicable slab rates	195	AMC
Any other LTCG	20%	195	Buyer
Coupon from bonds	30%	195	Company/Issuer
NRO Interest	30%	195	Bank
NRO FD maturity (interest portion)	30%	195	Bank
Dividends from stocks/REITs	As per applicable slab rates.	195	Company
Dividends from Mutual Funds	As per applicable slab rates.	195	AMC
Property Sale (short-term)	As per applicable slab rates.	195	Buyer
Property Sale (long-term)	12.5% without indexation (as per finance bill 2024.)	195	Buyer
Rent	30%	195	Tenant
Other income	As per applicable slab rates.	195	Payer

These TDS rates are designed in a way that they are the same or higher than the actual tax due. A cess of 4% applies to all TDS figures.

Gifts from resident Indian accounts to NRO accounts are TDS-free since it is not an income.

Note: See page 117 of Finance Bill 2024 for details of changing the TDS for property sales by NRIS from 20% to 12.5% under Section 195.

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

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.

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How much cess applies to TDS?

Since 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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