Taxes
deducted at source for NRIs are subject
deducted at source for NRIs are subject
to DTAA
February 05, 2015, Under the Income-tax
Act, 1961, NRIs are subject to TDS, which is chargeable in India. However, if
the NRI is a tax resident of a country with which India has entered into a
double taxation avoidance agreement (DTAA), then the provisions of the Act or
the DTAA, whichever is more beneficial, would apply. Accordingly, even if such
income is taxable under the Act, if the DTAA provides relief from taxation on
the income, then the provisions of the DTAA will prevail and the NRI will be
able to claim the benefit under the DTAA. Having said this, if the NRI lives in
a country where there is no tax and if the DTAA does not provide any additional
relief, then the income of the NRI would be subject to taxes as detailed below:
Act, 1961, NRIs are subject to TDS, which is chargeable in India. However, if
the NRI is a tax resident of a country with which India has entered into a
double taxation avoidance agreement (DTAA), then the provisions of the Act or
the DTAA, whichever is more beneficial, would apply. Accordingly, even if such
income is taxable under the Act, if the DTAA provides relief from taxation on
the income, then the provisions of the DTAA will prevail and the NRI will be
able to claim the benefit under the DTAA. Having said this, if the NRI lives in
a country where there is no tax and if the DTAA does not provide any additional
relief, then the income of the NRI would be subject to taxes as detailed below:
a) Exempt income such as dividends and long-term capital
gains (LTCG) on listed shares which suffer securities transaction tax (STT)
would not be subject to TDS;
gains (LTCG) on listed shares which suffer securities transaction tax (STT)
would not be subject to TDS;
b) LTCG and short-term capital gains (STCG) are typically subject
to TDS at the rate of 20% and 30%, respectively. But LTCG on shares of an
Indian company, debentures issued by public companies, and securities of
central government, which have been acquired or purchased with convertible
foreign exchange is subject to TDS at 10%. STCG on securities that are subject
to STT would be subject to tax deduction at the rate of 15%;
to TDS at the rate of 20% and 30%, respectively. But LTCG on shares of an
Indian company, debentures issued by public companies, and securities of
central government, which have been acquired or purchased with convertible
foreign exchange is subject to TDS at 10%. STCG on securities that are subject
to STT would be subject to tax deduction at the rate of 15%;
c) Royalty and fees for technical services are subject to TDS
at the rate of 25%;
at the rate of 25%;
d) Interest income earned from debentures issued by or
deposits with a public company, which the taxpayer has acquired or purchased
with convertible foreign exchange, would be subject to tax deduction at 20%
plus applicable surcharge and cess (all rates above are exclusive of applicable
surcharge and cess).
deposits with a public company, which the taxpayer has acquired or purchased
with convertible foreign exchange, would be subject to tax deduction at 20%
plus applicable surcharge and cess (all rates above are exclusive of applicable
surcharge and cess).
Apart from the above, any interest on money borrowed by
Indian companies or a business trust are subject to a beneficial tax rate of 5%
subject to satisfaction of certain conditions. All other income is typically
subject to withholding at 30%.
Indian companies or a business trust are subject to a beneficial tax rate of 5%
subject to satisfaction of certain conditions. All other income is typically
subject to withholding at 30%.
