Through this blog we shall be discussing Section 195 of The Income Tax Act that covers the TDS on Non Resident or NRI payments.
As Non Resident Indian, your income earned or accrued in India is taxable in India.
We have discussed the same in detail in our blog : NRI Tax and ITR : Which income of NRI is taxable in India and How ?
TDS Rate on Non Residents or NRIs Under Section 195 :
Tax is deducted at source(TDS) in case of NRIs at a flat rate irrespective of income tax slab, in case of most of the investment incomes earned by NRIs.
We have tried to cover the major categories here :
| Income | Rate of TDS |
|---|---|
| Interest earned on NRO Bank accounts,NRO Fixed deposits | 30% |
| Income from professional services and royalty | 10% |
| Interest on corporate deposits and bonds | 20% |
| Capital Gain on Gold and House property | LTCG - 20% STCG - 30% |
| Equity | STCG - Profit on sale within one year of purchase of shares TDS is 15% |
The rates have to be increased by surcharge and education cess at the rates prescribed.
Important Points to remember :
- NRO or Non Resident Ordinary Account can be opened as a Savings,current,recurring or a fixed deposit account.Interest earned on NRO is taxable and TDS @ 30% is applicable on it.
- In case of Resident Indians, TDS is applicable if interest earned on Fixed deposits is above Rs.10000. But,no such limit applies to NRIs and TDS shall be anyways applicable.
- Interest earned on Non Resident External Account/NRE Account and Foreign Currency Non Resident/FCNR Account are tax free. So,here no question of TDS arises.
- In case of equity investments, LTCG or Long term capital gain i.e.profit on sale of shares after 1 year of purchase is exempt from tax.This is exempt in case STT or Securities transaction tax is payable on redemption under section 10(38).
Capital gains on Mutual funds are taxed at following rates :
Tax on Mutual funds :
| Equity Mutual funds | Debt Funds | |
|---|---|---|
| Short Term Capital Gain (STCG) | Taxable @ 15% | Taxable as per Income tax slab rate |
| Long Term Capital Gain (LTCG) | Taxable @ 10% where LTCG>1 lakh (No indexation benefit) | Taxable @ 10% without indexation or 20% with indexation |
It is the duty of the payer ( even if he is an individual ) to deduct Tax at source (TDS) while making the payment to Non Resident Indians(NRIs).
Example : If a Non Resident Indian or NRI is selling his property in India to a Resident individual, TDS should be deducted by the resident individual on the sale value.
So,the payer i.e. the person making the payment needs to deduct tax at source may it be banks,companies,other institutions or even individuals.
However,if your actual tax liability comes out to be less than TDS or Tax deducted at source you don’t need to worry.You can file your Income tax return and claim a refund for the excess amount deducted.
This was all about TDS rates under Section 195 on payments to NRIs or Non Residents.
As a Non Resident Indian or NRI, if you are thinking about planning your investments, one of our best blog for NRIs will surely help you :
View Comments (6)
Hi, This is very well written.
I have a question about the possibility for refund of TDS. Can an NRI get the refund of TDS deposited by the tenant on rental income and/or deposited by Bank directly from interest on NRO account? Many thanks.
Thanks for the useful info. Please clarify that NRI who pays 30% TDS on FD can claim refund through filing income tax return if his total income for the year is less than 2,50,000/-
Hi Arun,
If your total taxable income for a particular financial year is less than the basic exemption limit of Rs.2.5 lakhs,you can claim refund for the extra TDS while filing your income tax return.
This is a really useful article for all NRI's. You get proper information about TDS rates through this blog.
Hi, If TDS Under Section 195 has been deducted based on NRO Savings Account. Can I claim refund of this amount? Please guide.
Thanks,keep visiting for latest updates.