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What are the TDS rates applicable to NRIs?

Posted on 21 Jul 2024
Author: Sayan Sircar

Tags: NRI ; Tax

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?

📚 Topics covered:

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 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.

Also read
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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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