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.
📚 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
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 | 12.5% | 112A | Brokerage |
| Bonds (corporate / gilt / state) | 12.5% | Company / Issuer | |
| Company FD | 10% | Company / Issuer | |
| Equity-oriented mutual funds | 12.5% | 112A | AMC |
| Business Trusts like REIT / InvIT | 12.5% | 112A | Company |
| Short-term Capital Gains | 20% | 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% (no indexation) | 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
Frequently asked questions on saving tax via Hindu Undivided Family (HUF): the complete guide
Frequently asked questions on saving tax via Hindu Undivided Family (HUF): the complete guide
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.
Related Articles
- Frequently asked questions on Tax Deducted at Source (TDS): the complete guide
- TDS on Property Purchase: A Step-by-Step Guide
- NRIs: How to File Your Income Tax Return on Rental Income from Indian Property
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