RATE CHART FOR WITHHOLDING TAX RATE APPLICABLE UNDER VARIOUS SECTION FOR NRI’S:
Section | Particulars | TDS Rate |
192 | Payment of salary | Normal Slab Rate |
192A | Premature withdrawal from EPF (No TDS below Rs 30000) | 10% |
194B | Income by way of lottery winnings, card games, crossword puzzles, and other games of any type (Up to Rs.10,000 per transaction- No TDS need) | 30% |
194BB | Income by way of horse race winnings (Up to Rs.10,000 per transaction – No TDS) | 30% |
194E | Payment to non-resident sportsman (including an athlete) or an entertainer (not a citizen of India) or non-resident sports association. | 20% |
194EE | Payment of amount standing to the credit of a person under National Savings Scheme (NSS) | 10% |
194G | Payments such as commission, etc., on the sale of lottery tickets (Up to Rs.20,000 – No TDS) | 2% |
194LB | Payment of interest on infrastructure debt fund. | 5% |
194LBA(1) | Payment of the nature referred to in Section 10(23FC) (a) | 5% |
194LBA(2) | Payment of the nature referred to in Section 10(23FC) (b) | 10% |
194LBA(3) | Payment of nature referred to in section 10(23FCA) by business trust to unit holders | 30%/40% |
194LBB | Payment of certain income by an investment fund to a unitholder. | 30%/40% |
194LBC | Income from investment in securitization fund | 30%/40% |
194LC | Interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or against the issue of long-term bonds*. | 5% |
194LC | Interest is payable in respect of Long-term Bond or Rupee Denominated Bond listed on recognized stock exchange located in IFSC | 4% |
194LD | Interest on bond (rupee-denominated) to Foreign Institutional Investors or a Qualified Foreign Investor | 5% |
195 | Income (dividend) on investments made by NRI citizen | 20% |
195 | Income by way of LTCG referred to in section 115E | 12.50% |
195 | Income by way of LTCG under section 112(1)(c)(iii); | 12.50% |
Section | Particulars | TDS Rate |
195 | Income by way of LTCG under section 112A; | 12.50% |
195 | Income by way of STCG under section 111A; | 20% |
195 | Any other income by way of STCG | 30% |
195 | Any other income by way of LTCG | 12.50% |
195 | Interest on money borrowed by the government or Indian concern in foreign currency | 20% |
195 | Income from royalty | 20% |
195 | Income from technical fees | 20% |
195 | Any other income (Interest) | 30% |
196B | Income from units of an offshore fund. | 10% |
196B | Long-term Capital Gain on transfer of units an offshore fund. | 12.50% |
196C | Income (Interest or Dividend) from foreign currency bonds or GDR of an Indian company | 10% |
196C | Income (including LTCG) from foreign currency bonds or GDR of an Indian company | 12.50% |
196D | Income (excluding dividend and capital gain) from Foreign Institutional Investors. | 20% |
Understanding Who Is an NRI for TDS Purposes:
Under Section 6 of the Income Tax Act, an individual qualifies as an NRI if they either:
- Stay for less than 182 days in India in the financial year, or
- Stay less than 120 days if Indiansource income exceeds ₹15 lakh and under 365 days in the preceding four years
Section 195 & TDS: Which NRI Income is liable for TDS
Any entity making payments other than salary to NRIs must deduct TDS under Section 195. This covers:
- Property sale proceeds, interest (including from NRO accounts and EPF), rental income, dividends, royalties, and professional/technical fees
Key points:
- Deduction must happen on accrual basis or payment whichever is earlier.
- No exemption threshold—every payment trigger TDS.
Exemption mechanism to Reduce or Waive TDS
1. Form 13 – Lower / Nil TDS Certificate (Payeeinitiated)
- NRIs can apply via Form 13 under Section 197 to reduce or eliminate TDS based on real tax liability.
- It is to be noted that LDC available under section 197 is valid for a specific payer (TAN) and financial year.
2. Form 15E – Payerinitiated Certificate
- The payer can file Form 15E (Sec 195(2)) for situations where tax is expected to be lower e.g. rental, interest, or service payments.
- Requires detailed documents: income estimates, capital gains computations, TRC, Form 10F, PAN etc.
3. DTAA Relief (Double Taxation Avoidance Agreements)
- NRIs residing in DTAA countries (US, UK, UAE, Canada, etc.) may be eligible for lower TDS rates, exemptions (e.g., services/royalty), or relief under treaty provisions.
- As per Income tax provision if DTAA benefit is available, then Income tax rate or DTAA rate whichever is lower will be applicable.
- To claim DTAA benefits, NRIs must submit:
- TRC (Tax Residency Certificate) from their country,
- Electronic generated Form 10F,
- Self-declaration of beneficial interest of owner.
- PAN to the payer
4. Capital Gains Exemptions (Sec 54/54EC)
- Relevant when reinvesting capital gains (e.g., into residential property or specified bonds) to claim exemptions.
Compliance Workflow: Deductor & Deductee Responsibilities
For the Payer (Deductor/Buyer/Bank)
- Obtain TAN, confirm your PAN, and verify recipient PAN.
- Deduct TDS at the mandated time of accrual or payment.
- Deposit TDS using Challan ITNS 281 within 7 days of the month following deduction.
- Filing of 15CA/CB in case of remittance abroad.
- File Form 27Q quarterly (due: 30 July, 31 Oct, 31 Jan, 31 May)
- Issue Form 16A within 15 days of return due date.
For the NRI Payee
- Update PAN / bank KYC to correctly reflect NRI status to avoid 206AA default rates.
- File Form 13 (with CAcertified estimates if needed) to get a lowerTDS certificate.
- Submit DTAA documentation (TRC, Form 10F) for treaty benefits.
- Check Form 26AS/AIS when filing ITR to ensure TDS credits are reflected.
What If TDS Not Deducted Correctly for NRI’s
- Nondeduction or default can lead the payer to face:
- Interest of 1–1.5% per month,
- Penalties under Sections 271C / 271H vary from Rs 10000 to Rs 1 lakh.
- Assessee in default under section 201.
Common Pitfalls to Avoid
- Not converting resident accounts to NRO/NRE poststatus change→ banks apply 30% resident TDS by default.
- Not applying for Form 13 / Form 15E → TDS is deducted on the full amount rather than actual gains.
- Ignoring DTAA → delays or refusal of treaty benefits due to missing TRC / 10F.
- Rent compliance: Tenants must deduct TDS each month at 31.2% since rent income cannot be considered as business income as per latest finance act amendment.
- Filing of Form 15CA/15CB on time in case of remittance abroad.