NRI TDS
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TDS on NRI income is governed by Section 195 (for non-securities income) and Section 196/196D (for securities income) of the Income Tax Act 1961. Different rates apply by income type: NRO interest 30%, equity LTCG 12.5%, equity STCG 20%, property sale 12.5% LTCG, rental 30%, dividend 20%.

DTAA (Double Taxation Avoidance Agreement) between India and the NRI's country of residence can reduce most rates significantly — to claim, submit TRC (Tax Residency Certificate) + Form 10F + PAN to the payer/deductor BEFORE the payment is made.

Section 195 applies to TDS on payments to non-residents (NRIs and foreign companies) for non-security income — NRO interest, rental, property sale, royalties, technical services. Section 196 applies to securities income — capital gains on listed equity, mutual fund redemptions.

Section 196D applies to dividend income from Indian companies. Section 196A applies to interest on offshore funds.

Practical implication: the SECTION determines who deducts (employer / bank / buyer / company) and the FORM (Form 27Q for non-resident TDS returns).

To claim DTAA reduced TDS rate, submit to the deductor BEFORE payment: (1) TRC (Tax Residency Certificate) from your country of residence — issued by tax authorities (IRS for USA, HMRC for UK, CRA for Canada, ATO for Australia). (2) Form 10F — self-declaration with PAN, address, nationality, TIN. (3) PAN card (Indian). Without these documents, the deductor applies the full Section 195 rate (typically 30% on interest, 20% on dividends).

With TRC + Form 10F, DTAA-reduced rate applies — typically 10-15% for most income types. Some banks/NSE-listed companies also accept e-filed declaration via their portal.

Yes — excess TDS over actual tax liability is refundable via filing ITR-2 (or ITR-3 if business income). Common scenarios: Property sale TDS at 12.5% on full consideration (not just gain) over-deducts massively; rental TDS at 30% over-deducts after 30% standard deduction.

CPC processes refunds within 30-60 days of e-verification. Section 244A interest at 0.5%/month added to refund from 1 April of AY (or payment date if later).

Pro tip: For property sale, apply for Form 13 (Lower Deduction Certificate) from IT Department BEFORE the sale — buyer can then deduct TDS at actual gain rate rather than gross consideration.

Form 13 application allows NRI sellers/recipients to request a LOWER TDS rate from the Income Tax Department by demonstrating that actual tax liability will be less than the default Section 195 rate. Commonly used for: (1) Property sale — request TDS on actual gain rather than gross consideration. (2) Large interest income with DTAA — request DTAA rate certificate. (3) Royalty / technical services with treaty benefits.

Application process: file online via TRACES portal with supporting docs (TRC, computation, treaty articles). IT Officer issues certificate (typically 30-90 days), valid for the specified FY.

Buyer/payer then deducts at the certificate rate. Saves cash flow vs deducting full rate and waiting for refund.

For a resident, a bank deducts 10% TDS only once your FD interest from that bank exceeds ₹50,000 in the financial year (₹1,00,000 for a senior citizen), under section 393(1) of the Income-tax Act, 2025 (formerly 194A); a resident with nil tax can file Form No. 121 to avoid it. For an NRI, interest on an NRO FD has TDS at 30% plus surcharge and cess from the first rupee, with no threshold, and Form 121 is not available; the rate can be reduced to the tax-treaty rate with a Tax Residency Certificate and Form 10F.

Interest on NRE and FCNR deposits is exempt for non-residents.

No — NRE (Non-Resident External) account interest is FULLY EXEMPT from Indian tax for non-residents under Section 10(4)(ii). Principal and interest both tax-free in India.

No TDS deducted. This applies only while you maintain NRI status — once you become resident again, NRE converts to RFC (Resident Foreign Currency) account and interest becomes taxable.

NRE-FD interest similarly exempt. NRO interest is the one that attracts 30% TDS (reducible via DTAA).

Common setup for NRIs: NRE for foreign salary remittances (tax-free), NRO for India-source income like rental / dividend (taxable, TDS applicable). Most NRIs maintain BOTH accounts.

Buyer must deduct TDS under Section 195 BEFORE making payment to NRI seller. For LTCG (property held > 24 months): TDS at 12.5% on GROSS SALE CONSIDERATION (not actual gain) without indexation, post 23 July 2024.

STCG: TDS at 30% (highest slab). The TDS is on FULL sale value — often results in massive over-deduction since actual gain might be much less.

Process: (1) Buyer files Form 26QB (Challan-cum-Statement for TDS on property), deposits TDS within 30 days. (2) Issues Form 16A to NRI seller. (3) NRI seller files ITR-2, computes actual gain (sale − indexed cost basis if pre-Jul-2024 + Section 54 exemption if reinvested), claims refund of excess TDS. Pro tip: Apply for Form 13 BEFORE sale — IT Department issues Lower Deduction Certificate, buyer deducts at actual rate.

Avoids cash flow crunch.

Standard documents required by the deductor (bank / buyer / company) before applying DTAA reduced rate: (1) PAN card (Indian — mandatory; without PAN, TDS at 20% minimum even if treaty would be lower per Section 206AA). (2) TRC (Tax Residency Certificate) from your country — confirms tax residency. (3) Form 10F — self-declaration with all required fields filled. (4) Treaty article reference for the specific income type (Article 11 for interest, Article 12 for royalties, Article 10 for dividends, Article 13 for capital gains typically). (5) Indemnity bond / self-attestation in some cases. (6) For property sale: relationship to property + ownership docs. Banks/AMCs also require KYC re-validation as NRI (Aadhaar may need updating).

Submit BEFORE first payment of the FY — applies to all subsequent payments that year.