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NRI Corner: Income Tax and TDS Rates for NRIs

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Non-residents face a favourable tax regime in India. Their global income is not taxed in India, which is not the case with resident Indians. Only income earned in India is taxed in India.

However, there is one aspect of taxation where residents fare better. Tax deduction at source (TDS) rates are much higher for NRIs as compared to resident Indians. In this post, I shall list down TDS rates for various types of income for NRIs.

For the purposes of taxation, you must be an NRI as per the Income Tax Act (and not as per FEMA).

Definition of NRI as per Income Tax Act

As per Section 6 Income Tax Act, you are a Resident (for a financial year):

  1. If you are in India for 182 days or more in the financial year; OR
  2. If you are in India for 365 days in the preceding 4 financial years and 60 days in the financial year. This condition is not applicable if you are leaving India for employment or are a PIO on a visit to India

You are an NRI if you do not meet any of the above conditions.

Taxation of NRI Income in India

Income earned by NRI outside India is not taxable in India.

Only the income which is earned in India is taxed in India. Such income would typically include salary received in India, rental income from properties in India, interest on bank deposits or other securities, dividend income, capital gains etc.

Rates of taxation for various types of income applicable to NRI are same as those applicable to resident Indians.

Why are TDS rates for NRIs so high?

If an income is not taxable such as long term capital gains on sale of equity shares or mutual funds, then TDS is not deducted.

If the income/gain is taxable in India, TDS is deducted at the highest possible income tax rate at which such income is taxed (unless the TDS rate is explicitly provided).

The rationale is that it may be difficult to chase NRI tax-payers if they fail to (or choose not to) file their income tax returns. That’s why TDS is deducted at the maximum possible rate for that particular type of income.

Once the TDS has been deducted and deposited with Government, claiming the refund of excess TDS is NRI’s problem. The Government has got its money.

For instance, short-term capital gain on sale of equity shares is taxed at 15%. In case of NRI investors, applicable TDS on such gains will be 15%.

Let’s look at TDS rates for common sources of income for NRIs.

#1 TDS on Interest on NRO/NRE, FCNR(B) Deposits

Interest on NRE or FCNR(B) deposits is exempt from tax in India. Hence, TDS is not applicable.

On the other hand, interest on NRO deposits is taxed as per the income tax slab of the investor. TDS on such interest income will be deducted at 30% for NRI investors. It is quite possible that the NRI investor does not fall in the highest income tax bracket. However, the bank is not aware of this. Hence, it deducts the TDS at the maximum possible tax rate. If you fall in the lower tax bracket, you can get the refund after filing returns.

For residents, there is no TDS on interest on savings account. On fixed deposits, TDS is applicable only when the interest income on fixed deposits (across the bank) exceeds Rs 10,000 (Rs 50,000 for senior citizens from FY2019) during a financial year. Unfortunately, for non-residents, there is no such threshold. Interest income on NRO accounts is subject to TDS irrespective of the interest amount.

Must Read: How to save TDS on Bank Fixed deposits?

#2 TDS on Interest Income on other investments by NRIs

Interest income on any other investments such as bonds, corporate FDs etc is taxed as per income tax slab. TDS shall be deducted at 30%.

#3 TDS on Dividend Income received by NRIs

Dividend income (mutual funds and equity shares) is exempt from tax in the hands of the investor. Hence, there is no TDS deducted.

Tax on dividend income, if any, is deducted upfront by the mutual fund house in the form of dividend distribution tax (DDT). There is no additional tax to be paid by the investor. Hence, no separate TDS is required to be deducted.

DDT on debt funds is 25%. Please note the DDT is charged on grossed-up basis. After including surcharge and cess, the net tax hit is about 29%.

Budget 2018 introduced Dividend Distribution Tax (DDT) of 10% on the dividend from equity mutual funds. This has, in my opinion, spoilt the case for investing in equity mutual funds for dividends.

If the dividend from equity shares in a particular financial year exceeds Rs 10 lacs, dividend in excess of Rs 10 lacs shall be taxed at 10%.  I am not sure if this will have any impact on TDS on the dividend for NRIs.

#4 TDS on Capital Gains on Sale of Equity Mutual Funds/Equity shares by NRIs

If you sell any equity share or unit of equity mutual fund within 1 year of purchase, the ensuing capital gain/loss is termed short-term capital gain/loss. Such short term capital gains are taxed at 15%.

For residents, there is no TDS applicable. For NRIs, TDS on such short term captial gains will be deducted at 15%.

Alternatively, if you sell any equity share or unit of mutual fund after 1 year of purchase, the ensuing capital gain/loss is termed long term capital gain/loss. Such long-term capital gains are exempt from income tax. Since the long term capital gains are exempt, there is no question of TDS either. 

Such long-term capital gains on the sale of equity/equity shares by NRIs shall be exempt to the extent of Rs 1 lac per financial year. For the LTCG in excess of Rs 1 lacs, the capital gains will be taxed at 10%.

Therefore, TDS for LTCG on equity shares/equity funds for NRIs will be 10%. 

Do note an AMC (mutual fund house) does not know about your gains from other AMCs. Therefore, it will deduct TDS at 10% irrespective of whether your total LTCG for the year exceeds Rs 1 lac or not. You can claim excess tax deducted by filing income tax return.

Read: NRI Corner: How to invest in Equity markets in India?

Read: Long Term Capital Gains

Read: Short Term Capital Gains

#5 TDS on Capital Gains on Debt Mutual Funds (for Non-residents)

TDS for short term capital gains (holding period <=3 years) will be 30%. Short term capital gains are taxed as per investor’s income tax slab. If the NRI falls in a lower tax bracket, he can claim excess tax deducted through income tax return.

TDS for long term capital gains (holding period <=3 years) will be 20%. Such long-term capital gains are taxed 20% less indexation. However, TDS will be deducted at 20%. You can claim the refund of excess tax deducted at the time of filing income tax return.

#6 TDS on Capital Gains on sale of Property/Gold

TDS will be deducted at 20% for any short term capital gains (holding period <=3 years for gold and <= 2 years for a property).

TDS will be deducted at 30% for any long term capital gains (holding period > 3 years for gold and > 2 years for a property).

Note: The holding period for the gains resulting from the sale of property to qualify as long-term capital gains has been reduced from 3 years to 2 years (Budget 2017). For gold, such holding period remains 3 years.

The onus of collecting the TDS and depositing with the Government lies with the buyer (payer).

This is where the problem lies. How does the buyer know how much capital gains you (NRI) are making on such transaction. What does he do? He deducts TDS on the entire sale consideration. Harsh, isn’t it?

There is a way to avoid this. The buyer can get a certificate from Assessing Officer (under Section 195(2)) stating the portion of sale consideration which shall be liable to TDS. Alternatively, the NRI seller can arrange a certificate from Assessing Officer under Section 195(3) or Section 197 of the Income Tax Act specifying a lower rate of TDS. The buyer on receiving such certificate can deduct income tax at the rate specified in that certificate.

Unless such certificate is obtained, the buyer must deduct TDS on the entire sale consideration. If the buyer doesn’t deduct TDS, he stands in violation of Income Tax Act. I am not joking. Go through this case to understand the serious implications: Syed Aslam Hashmi Vs ITO.

As a buyer, if you are purchasing a property from NRI, you must make sure of this. If you make the mistake and the NRI fails to file income tax return (and pay capital gains tax), the tax man will be knocking at your door.  So, if you don’t deduct TDS and NRI (the seller) fails to pay capital gains tax, you are in some serious trouble.

Section 195 has been drafted for this very purpose to prevent NRI from taking money abroad without paying any tax, where Income Tax Authorities have no control.

The buyer must get a Tax Deduction Account Number (TAN) and issue TDS certificate to the seller (NRI).

Relief under Section 54, Section 54EC and Section 54F is available to NRIs.

#6 TDS on Rental Income earned by NRIs in India

You have purchased or inherited properties in India. You have given out those properties on rent. Such rental income is subject to TDS at the rate of 30%.

The onus of collecting and depositing TDS lies with the tenant (rent payer). He will have to get TAN and issue TDS certificate to the owner (NRI).

Rental income is taxed at the marginal income tax rate. If you fall in the lower tax bracket, you can claim it back at the time of filing income tax return.

#7 TDS on All other Types of Income

All other types of income unless explicitly specified in the Income Tax Act are subject to TDS at the rate of 30%. Even rental income is not explicitly defined in the Act, hence default rate of 30% is considered.

Can NRIs submit Form 15G/Form 15H to avoid paying TDS?

NRIs cannot submit Form 15G/15H to avoid paying TDS rates. It does not matter if your total income is below the minimum tax exemption limit (Rs 2.5 lacs for <60 years). Only resident Indians can submit Form 15G/Form 15H.

Double Tax Avoidance Agreement (DTAA)

If your country of residence has a DTAA with India, then you may be subject to concessional TDS rates. Respective DTAAs override the provisions of the Income Tax Act.

Your (NRI’s) income in India may also be taxed in your country of residence. DTAAs help avoid double taxation. You get credit for the taxes paid in India. Tax residency certificate must be produced for availing benefit under DTAA.

Points to Note

  1. For NRIs, the tax exemption limit is Rs 2.5 lacs irrespective of their age. For residents, it is Rs 2.5 lacs (< 60 years), Rs 3 lacs (between 60 and 80) and Rs 5 lacs (80 years and above)
  2. Surcharge and cess are applicable to NRIs too (except in cases where DTAA rates are applicable)
  3. The payer (buyer) will issue TDS certificate to the seller (NRI) in case any TDS has been deducted.
  4. NRIs cannot adjust capital gains by the amount the total taxable income falls short of minimum tax exemption limit. Only residents are permitted to do so.
  5. If a resident made a capital gain of Rs 2 lacs and has no other income during the year, he won’t have to pay any tax since the total income falls below Rs 2.5 lacs. An NRI, in a similar situation, will have to pay tax on Rs 2 lacs of capital gains.
  6. If you do not submit PAN, TDS will be deducted at higher of (20% or the rate specified in the Income Tax Act). (Section 206AA(1))
  7. If your income tax liability is lower than TDS deducted, then you can claim back excess tax paid/deducted at the time of filing income tax returns.
  8. Deduction of TDS or payment of tax in India does not complete your (NRI’s) tax liability. Depending upon tax laws in your country of residence (local), you may be required to pay tax on Indian Income in your local country. You can seek tax credit for income tax paid in India if your local country has DTAA with India. For instance, interest on NRE deposits is not taxable in India but may be taxable in your country of residence
  9. The onus of collecting TDS while making any payment to a Non-resident lies with the payer. If such payer does not collect TDS and NRI fails to file income tax return, the payer can be held accountable.

TDS Rates for NRIs TDS on capital gains for NRI income tax rates for NRI

Disclaimer: This is my interpretation and a very simplistic representation of provisions of Income Tax Act. Do understand the list is not exhaustive. There might be many provisions that may change the applicable TDS rate or even the tax treatment in a particular case. You are advised to seek services of a tax consultant before making any investment decision.

Additional Read:

Applicable TDS Rates on Income Tax website

Book: In the Wonderland of Investments for NRIs by A.N.Shanbhag/Sandeep Shanbhag

88 thoughts on “NRI Corner: Income Tax and TDS Rates for NRIs”

  1. Thanks Deepesh, for this article.It was quite an eye opener. Its clear now that the interest on NRO savings bank account is subject to TDS.

      1. Hi Mr. Deepesh,

        Thanks for the informative Article.
        I need your help on the below issue.
        I am a NRI and have a policy from ICICI Prudential – (Pension Rich Fund) which would mature in August. ICICI guy says that the earnings on this policy is subject to 30.5% TDS. Is this correct and is it possible to get a refund of this TDS. If yes what Percentage of the TDS can be got as a refund.
        Warm Regards and Thanks.

        1. Dear Mr. Suhail,
          I have not gone into the details of your plan. Will talk
          The portion that gets commuted is exempt from tax. Therefore, there will be no TDS.
          However, you will also have to purchase an annuity plan from a portion of your corpus.
          Such annuity income will be subject to 30% TDS since you are an NRI.
          Technically, such income is taxed at your marginal tax rate, which may be less than 30%.
          You can file for refund accordingly.

          If the ICICI guys are asking you to surrender the plan (or shift to another plan) to save this TDS, they are misleading you. You know what to do with such people.
          Suggest you go through these posts.
          https://www.personalfinanceplan.in/tax-treatment-of-pension-plans-from-insurance-companies/
          https://www.personalfinanceplan.in/maturing-pension-plans-ulips/

  2. Kannan Srinivasan

    Sir,

    I am an NRI living in USA for the past 20 years.. My Wife is a home maker. Out of her savings she opened an PIS account in india and invested in stocks for a long term..

    She received Dividends
    She made long term capital gains here

    She is filing Tax returns in india. She holds a PAN number..

    My few questions

    1) She is also an NRI and should I include these dividends and capital gains made in India in my US tax returns.
    2) She has a fixed deposits also and all cumulative and under Indian tax laws it is exempt from taxes.

    Should I disclose the same in my US IT returns

    Kindly clarify..

    1. Deepesh Raghaw

      Dear Sir,
      Please understand I am not much verse with US tax laws. Suggest you talk to a local tax consultant.
      As I understand, your global income is taxed in US.
      You do get tax credit for taxes paid in India.
      In that case,
      1. You will have to disclose dividend and capital gains (in India) in US returns and pay taxes accordingly. If there are any taxes paid in India, you can claim credit for it.
      2. Yes, disclose and pay tax.
      Please approach a local tax consultant in Us.
      Good luck!!!

  3. Hi

    First of all. thanks for such an informative article.

    I have rented an apartment in pune which is jointly owned by me and my wife.
    the monthly rent is 19000.we pay muncipal taxes of 26000 per annum. we have taken a joint home loan where we pay 42000/m emi with 28000 interest component. I have following questions.

    1. seeing above whats the final taxable rent for each of us?

    2. for taxation purpose is the tenant supposed to split the rent in half and pay to both of us separately?
    3.if we have a joint savings NRE account can the total rent be taken in single name and while filing returns shown as 50% for each.

    4. 50% is 114000 rent for each of us which after all deductions will come down even more. I had read somewhere that if the taxable rent is less than 1.8lakhs then no need to deduct TDS of 30%. whats the rule here? is it 1.8 lakhs on total rent or 1.8 lakhs for each of the receiver?

    It would be nice if you can shed light as many will be having similar case as above.looking forward to youradvice on same

    1. Thanks Peeyush.
      Please understand my understanding of income tax laws and FEMA regulations is limited. You are advised to verify my suggestions/inputs with a good (not just any) Chartered Accountant and a FEMA expert. Seek professional advice in this matter.
      1. You can deduct municipal taxes from total rent received. Additionally, you can take standard deduction of 30% and any deduction for interest paid on a home loan.
      2. Joint ownership is immaterial. If your spouse didn’t contribute monetarily towards purchase of house, the entire income is yours. You need to check this aspect. If she has contributed, then I think you can split rent.
      3. Rent should be credited in NRO account (and not NRE account). In my opinion, as long as transaction are genuine and taken place through normal banking channels, it does not matter how you receive rent. You can always manage at the time of filing returns. Talk to a good CA in this regard. You can take in a joint account. I am not sure how the tenant will deduct TDS in this case.
      4.As I understand, this benefit is not available to non-residents.

      1. thanks Deepesh for your inputs. I have been speaking to quite a few CAs but have got varied views on the above points as most of the CAs I have interacted with are good at resident taxation but do not have indepth knowledge on NRI taxation and laws

        1. You are welcome. I can understand. Even I have found many CAs woefully short.
          Why don’t you try talking to guys at ClearTax? Shouldn’t be very expensive either.

  4. akbid65@gmail.com

    Deepesh,
    Very nice article. I have a query related to selling equities as NRI. I am tax resident of Singapore, not filling any IT return as don’t have any Income in India. But I have few shares from long time, converted in Demat from physical paper certificates and current value less than 2 lacs. Since, unable manage time to lookafter this matter and planning to sell it. Could you guide me what is tax implication and who will deduct TDS? For this one off item, I dont want to go regular filling of IT return in India.

    1. Hi,
      If you own the shares for over 1 year, there is no capital gains tax liability. Long term capital gains on sale of equity share are exempt in India.
      When there is no capital gains tax liability, there is no TDS.
      If there is any capital gains tax liability, your broker deducts TDS before settling the amount.

  5. Dear Sir,

    I have investments in DSP Blackrock Funds in World Gold Fund and World Mining fund (also in general in any Liquid / Debt Funds), I have the following query.

    I am investing in liquid and World Gold Funds / World Mining mutual funds as NRI Investor from UAE with whom India currently as Double Taxation Avoidance Agreement (DTAA).

    Based on DTAA bank applies TDS on my interest income on NRO bank fixed deposits at a reduced rate at 12.5% instead of 30% (normal rate). For this I need to submit a self declaration that I am a NRI from UAE and nothing more is required. Even this TDS can be claimed back up to a limit of 1.5Lacs income (as tax free income) by submitting a formal IT returns with the IT Department and the IT department refunds this amount by crediting back to my bank account.

    Now in mutual funds, every time I redeem funds debt / liquid / international funds (classified as debt) the TDS is being deducted at 33% by the Mutual Funds.

    I have 2 questions / clarifications in this regard.

    1. If I provide DTTA declaration (as I provide for my bank fixed deposit account), can this TDS be deducted at a lower rate of 10%?

    2. Alternatively, am I allowed to claim this as tax refund from IT Department by filing tax returns? What is the Income Tax rule in this regard with regard to the taxation for NRI for investments on debt mutual funds?

    If fixed deposit TDS are done at reduced rate based on self declaration why not the same is possible in MF? If not could you please confirm whether I can file tax returns and claim this as refund? I have no other taxable income in India!

    I have checked with couple of Charted Accountants, none of them could provide a proper answer to the above.

    Request you to clarify the above.

    Regards

    Ajay

    1. Dear Ajay,
      1. A lot depends on the DTAA between your country of residence and India. If the DTAA provides for favourable treatment, you can furnish requisite documents along with your TRC and get TDS deducted at lower rate. You will have to check what the rate for capital gains is.
      However, if there is no mention of reduced rate for capital gains in DTAA, there will be no reduction in TDS rate.
      Why don’t you talk to the AMC (or the mutual fund house)? They will guide you with the process.
      Interest income is different from capital gains.
      2. TDS is essentially a form of advance tax. If excess tax has been deducted in the form of TDS, you can claim it back at the time of filing returns. You can talk to a Chartered Accountant. He/she will help you file income tax returns.
      Please note NRIs do not get benefit of setting of capital gains with tax exemption limit of Rs 2.5 lacs. Only resident Indians do. So, if you made short term capital gains of Rs 50,000 on debt funds and no other income during the previous year, you will still have to pay tax on STCG. However, TDS would have been deducted at 30% while actual tax rate will be only 10%. You can claim excess tax deducted at the time of filing income tax returns.

      Please understand I am not a tax expert.

  6. Hi,

    Kudos for the informative article!

    My query is regarding NRI short term cap gain on shares/stock/ipo.

    1. Will my tax @15% get deducted at source?
    2. If so, will I (NRI) have to file return?

    Thanks

    1. Thanks!!!
      1. Yes, for short term capital gains on equity/ equity funds. For other investments, rate of TDS may be different.
      2. Depends on so many other factors.

  7. Hi Deepesh,

    Nice artlicle.
    I saw the taxation for NRI’s on trading stocks lest than 1 year v=capital gain 15%. What is the taxation for income gain for futures and options trading?

    Your help is appreciatated!

    Regards

    Ajmal

    1. Dear Ajmal,

      Taxation on derivatives is slightly complicated. Not possible for me to cover in a comment. Perhaps, I will write a post on this topic in the near future.
      There is a good write-up on the topic on zerodha website. Suggest you go through the article.
      http://zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified
      NRIs can trade only on non-repatriation basis in futures and options.
      Also, consult a good tax consultant in this matter.

  8. Hi Deepesh

    I am an NRI leaving in UAE.

    Have purchased a DLF Flat in Delhi

    Due to delay in project DLF is paying us compensation for a total of 1418 days (the total amount of INR 6,40,000 and wanted to pay the compensation after deducting TDS @ 30.9%

    Do you think this is OK

    1. Hi Danish,

      In my opinion, DLF is right in deducting TDS @30.9%.
      If excess tax has been deducted, you can claim it back at the time of filing income tax return.
      Suggest you verify this with a Chartered Accountant too.

      1. Hi Deepesh

        Many thanks! for your time and valuable reply.

        Do you know if TDS is applicable on a rental income of 1.6L/annum?

        1. You are welcome, Danish.
          Since you are a NRI, TDS is at maximum possible rate. So, yes, TDS will be deducted at 30% even for rental income of Rs 1.6 lac per annum.
          It is quite possible you can furnish some document to avoid it.
          Suggest you check this with your CA.

  9. Dear Deepesh,

    first i like to thank you for an excellent blog. Very informative. thank you. i know i might be asking a similar question you might have across but would appreciate your reply.

    I am an nri, and my only source of income is stock trading tru bse and nse. I do long term investing (more than 1 year) and also short term investing and i have been investing since 2010 in the stock market and have made more than 20 lacs profit per year since then.

    I have never file my return to IT as i though that as my tds (short term tax 15%) is already deducted by my bank as per rbi regulation and long term investment does not carry any tax)

    my question to you :

    1.do i need to file my returns since 2010
    2. and if i need to file my returns what is the aprox. penalty for non filling, please remember i have already paid my taxes, however i have not file my returns. i have read somewhere it is around rs 5000 per year for non filling. Please confirm the aprox amount

    thanking you

    1. Dear Hassan,
      Suggest you consult a Chartered Accountant in this regard.
      As long as TDS is getting deducted, it shouldn’t be much of a problem.
      However, there could be issue (I am not sure) about whether you qualify as investor or trader. For investor, income will be taxed as capital gains. For traders as business income.
      http://zerodha.com/varsity/chapter/taxation-for-traders/
      http://zerodha.com/z-connect/traders-zone/taxation-for-traders/taxation-simplified
      Suggest you talk to a Chartered Accountant for more on the same.

  10. Dear Deepesh.
    If I buy a land from NRI who owns this land for last 10 years, with a price of 36 lakhs on my name and 29 lakhs on my wife’s name as two registrations, do we have to deduct TDS before registration? If yes, how much percentage? The NRI seller bought this land 10 years before for 9 Lakhs.
    Thanks

    1. Dear Rajan,
      Please understand I am not a tax expert. Please consult a Chartered Accountant in this matter.
      Yes, you need to deduct TDS. In this case, it will be 20%.
      20% of the long term capital gains (since you can calculate the capital gains) or the sale consideration, I am not too sure.
      Please talk to a CA.

  11. Hi Deepesh,

    This is quite informative article. Thanks for such simple explaination.

    I am an NRI & hold some equities via PIS and receive regular dividends amounting above 10 lakhs. I would like to know how to process tax on this dividend income. Dividend in excess of Rs 10 lacs shall be taxed at 10% for resident Indians. Is it same for NRI?

    Thanks

    1. Hi Ashok,
      Thanks Ashok.
      I read the Act again. As I understand, this clause is applicable only to Residents. So, you should be ok.
      Suggest you verify this with a Chartered Accountant.

  12. Many thanks Deepesh for such a nice article. I found your article quite informative, I just need to know the following from you:-

    1.I understand, my income from trading in Future and options in Indian stock market will be treated as Income from Business and Profession. May I enjoy to claim the basic exemption limit of Rs 250,000 on it?
    2. My income from investment in mutual funds and stocks will be counted as capital gain income, in case of losses in this segment, can I adjust it against my income from derivative segments.

    Many thanks again.

    Regards
    Navin

    1. Dear Navin,
      To be honest, this is one aspect that always confuses me. There is a bit of discretion involved.
      Suggest you verify my opinion with a good Chartered Accountant.
      1. With business income, you will get benefit of basic tax exemption limit.
      2. Can’t do that. Capital losses can only be set off under the same head.
      Suggest you go through some brilliant post on this topic on Zerodha website.
      http://zerodha.com/varsity/chapter/taxation-for-traders/
      Nithin is quite active in answering queries too. So, you can ask him these questions too.

      1. Your replies are quite clear, if I have only income from derivatives, I will enjoy tax exemption on my first 2.5 lakh. I cannot adjust capital losses with derivative income.

        Thanks a lot.

  13. Dear Deepesh,

    Thank you for such an informative article.

    I am an NRI working in Saudi Arabia and have the following queries.

    1. Can we use an NRE account to invest in Equity SIP Mutual Fund?
    2. I understand the money can be deposited only from outside India to an NRE account. Now, Consider a situation where I redeem the Mutual Fund say after 3 years then, is it possible to redeem it into my NRE account?

  14. Nice article as always.
    I happen to be a resident of both US and India (RNOR). Have already filed and paid taxes in US on interest on FDs with Indian banks. Am behind on filing my Indian taxes and wondering how do I take credit or deduct the taxes already paid to the IRS, while doing my Indian taxes.
    Am in a small town and the CAs I approached have little clue.
    Any thoughts on how I can proceed. Thanks.

    1. Thanks John.
      I am not the right person for this. My knowledge is fairly limited.
      Suggest you contact ClearTax for filing returns. They might be able to help.

  15. Hello,

    i need to deduct TDS on rentals to the Owner who is NRI.

    is the deduction rate 30 % or 30.9 % which includes cess??

  16. Factory Law consultants

    Hey, very nice site. I came across this on Google, and I am stoked that I did. I will definitely be coming back here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment. Thanks for sharing.
    Factory Act Consultants

    Keep Posting:)

  17. I am consulting with C.A but I found your article knowledgeable. I had a query in case you can help, I am an Indian resident and purchasing a more than Rs 50 Lakh residential property from a NRI from Singapore where India has DTAA. As such the rate is 20% TDS on gross amount but just wanted to check because of DTAA does that rates come down or remain same?

    1. Deepesh Raghaw

      Thanks Kirti!!!
      Sorry but I will refrain from giving tax advice.
      My half-baked advice can land you in serious trouble.
      A CA is the right person to answer such questions.

  18. Thanks Deepesh for this article. Very informative. Accidentally came across it while searching for NRI tax implication on returning to India. Book marked it and will pass it on to my NRI friends.

    1. Deepesh Raghaw

      You are welcome, Sajan. That is very kind of you.
      Please understand I am not a tax expert and is not a replacement for professional tax advice from Chartered Accountant.

  19. NRI received Rs. 72 Lakh as dividend from indian company in AY 2017-18
    What will be the tax liability for NRI??

    1. Deepesh Raghaw

      10% of the dividend amount for dividend in excess of Rs 10 lacs.
      Please contact a Chartered Accountant.

  20. I had invested in Derivatives for the last 4 years and have suffered losses. Due to lack of knowledge, I did not pay taxes on this loss. What should I do now to clear my taxes on the capital loss?

    1. Deepesh Raghaw

      You don’t have to pay taxes on losses. You have file in tax-returns if you want to carry forward.
      Please talk to a good Chartered Accountant

  21. Nayan Agrawal

    I am a Broker, I have a NRI client who have earned 60 lacs short term capital gain, do I have to deduct TDS @ 15%.

  22. AVANISH AHLUWALIA

    Dear Deepesh,
    I have gone through your various articles and understand following. Pls correct me if I am wrong.

    If I invest in Direct Mutual Fund ( equity or debt or anything ) with mode of payment is through NRE account and hold the funds for more than 3-5 years there would not be any TDS deduction. Returns/Tax implication would be similar to as of Resident account holder. Please confirm.

    1. Hi Avanish,
      Capital gains from debt funds are taxed even after 3 years, albeit at a benign rate.
      No TDS for equity funds after 1 year.
      Redemption from debt funds will always have TDS implications.
      Capital gains tax treatment is otherwise similar for residents and non-residents.
      Does not matter whether you invest through NRE or NRO account.

  23. AVANISH AHLUWALIA

    1. Suppose an NRI earns 10 lac/ annum interest on his NRE deposits. Does he need to file tax return as amount exceeds exception limit of 3 lac/annum. I understand there is TDS on NRE deposit and there is no tax liability on principal as tax has been given in resident country. But still confirm.
    2. For Resident FD is there only TDS+cess deduction ( i.e. 10.3% while maturing ) and there is no tax on interest? Pls confirm my understanding.
    for example I put 30 lac in Resident deposit at 10% annum for 1 year and on maturity I get 3 lac interest. There would be 10% TDS deduction i.e. 30000 so resultant interest would be 2.70 lac. Will there be any tax on 2.70 lac also while filing the return.

    1. Hi Avanish,
      There is no tax on NRE deposits.Hence,question of TDS does not arise.
      Hope I got your question right.

  24. Hemershield Almeida

    Dear Sir
    I returned from gulf and again i am going back after 7 or 8 months. in this case what can i do for my NRI accounts. please advise.
    Thanks and regards
    Hemershield

  25. Dear Sir,
    Thank you very much for this article. It was Very informative. My wife has opened an NRE Account and invested Mutual funds in India on Repatriable Basis. Recently She got Dividend. But the Bank is rejected the amount to credit in NRE Account. Actually, She online Purchased the Mutual fund units from NRE Account. Can I credit my Dividend amount to NRE account? what can I do to credit my Dividend to my NRE accounts? please advise.
    Thanks and regards
    Sony

    1. Dear Sony,
      Was the dividend transferred online or you got a cheque?
      Did you check with the bank the reason for rejection? or why the dividend credit was rejected?

  26. Sir ,If TDS amount deducted 10% for unlisted shares.TDS amount deducted on capital gain or the sale amount?If tds is deducted on sale amount please quote the section or any caselaw

    1. For case laws, please consult a Chartered Accountant.
      Typically, TDS has to be capital gains. However, the buyer can’t be sure of your purchase price.
      Therefore, to be on the safer side, he/she deducts on the entire sale amount.
      A CA is a better person to guide you in such matters.

  27. Dear Sir,

    I purchased infosys shares on june 2016 and sold 50% of the shares that i had purchased under company buyback scheme on december 2017 which is more than a year after.
    In this case am i subject to any TDS deduction on the buyback sale amount.

    Thanks

  28. Thanks Deepesh for the info.
    I’m buying a property from nri couple in Pune. Husband claims that he had paid all money while buying the property and wife name was added as a safety.
    Now while deducting TDs, he insists on deducting all TDs on his name and filling TDs only on his name not his wife. I’m not sure if taxman will send a notice as I will not be filling TDs on his wife’s pan.

    1. Hi Vijay,
      Please contact a Chartered Accountant for this.
      In my opinion, you should be ok if you are deducting the requisite TDS. Assume you are making the entire payment to the husband.
      However, please consult a CA before you decide anything.

  29. Hi Deepak,

    Excellent article for NRI’s.

    I have one query regarding short term capital gain on debt type mutual fund. In your blog you mentioned at one place that short term capital gain on debt mutual fund will be taxed as per the income tax slabs
    “TDS for short term capital gains (holding period <=3 years) will be 30%. Short term capital gains are taxed as per investor’s income tax slab. If the NRI falls in a lower tax bracket, he can claim excess tax deducted through income tax return."

    In another place you mentioned as below which is contradictory:
    "NRIs cannot adjust capital gains by the amount the total taxable income falls short of minimum tax exemption limit. Only residents are permitted to do so. If a resident made a capital gain of Rs 2 lacs and has no other income during the year, he won’t have to pay any tax since the total income falls below Rs 2.5 lacs. An NRI, in a similar situation, will have to pay tax on Rs 2 lacs of capital gains."

    I believe for the later statement you meant for the Long Term Capital Gain for debt fund and short term Capital Gain for Equity Funds. Is my understanding correct?

      1. Hi depesh,

        I want to about TDS

        If property is on joint named. Primary person is indian resident and other is NRI (son) then how to deduct TDS .

        Can person deduct TDS 1% if he transfer full money in one account holder name who is indian .

        1. Deepesh Raghaw

          Hi Abhinav,
          I am not the right person to answer this query.
          For a resident, TDS is 1%. For NRI, TDS is 20%.
          Not sure about your query. In my opinion, this should not be allowed.
          Please consult a chartered accountant.

  30. Dear Deepesh

    Can we claim back TDS levied share sales done within 1 year in NRI Trading account thru filing ITR.

    Regards
    Durgesh

  31. Hello Deepesh,

    I am an NRI for the past 11 years and now i intend to return to India. All my savings are put as FD in my NRI account. Now my questions is: Is there any time frame allowed to keep the NRI status with banks after I return? When I inquired, I got mixed answers. Some one told i have to change the status with banks immediately on my permanent return, some people says 6 months, some says 1 year and some says 3 and a half year. Since my investments are in Bank FD, the status change plays a major role on my taxable income. Your valuable answer will be of great help to me.

    1. Hi Abraham,
      You must do it within reasonable time. I believe a couple of months is a reasonable time.
      When you come back to India, you are resident (as per FEMA) from day 1.
      Even if you continue the NRE account, such interest income on NRE account will still be taxable.
      So, no point delaying the matter.

  32. Please let me know if Income tax is applicable on the Interest paid on maturity of NRE FDs, if Residential status of the depositor changes from NRE to Resident Indian before maturity of such FDs.

    1. Deepesh Raghaw

      Interest on NRE FDs is taxable from the date your residential status changes to Resident (as per FEMA).

  33. Hi – nice, informative blog, thank you.

    I have a query regarding the treatment of gains/losses from shares (equity).

    I have capital gains as well as losses. However, noticed that there is a TDS deduction for all gains. How may I claim a refund for this TDS paid given there was a loss at the overall portfolio level? Further, is it possible to claim the TDS refund for prior years as well? I haven’t filed returns in previous years as my only source of income from within India was equity.

    Appreciate any guidance please.

    Regards

    1. Hi Indira,

      You can claim refund for excess tax paid by filing ITR for the financial year.
      There are last dates for filing ITR for each financial year. Please check with a tax advisor.

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