"TDS Rules for NRIs: Key Insights Simplified"

The article explains the Tax Deducted at Source (TDS) provisions for Non-Resident Indians (NRIs) in India, highlighting higher TDS rates, taxable income types, exemptions under DTAA, and procedures for claiming refunds or lower deductions. It also outlines compliance requirements and penalties for errors in TDS deductions or payments.


TDS (Tax Deducted at Source) is a mechanism in India where tax is collected at the source of income. For Non-Resident Indians (NRIs), the provisions of TDS apply differently compared to residents due to their unique tax status. Below is a detailed table explaining the key aspects of TDS for NRIs in India.
Aspect Description
Definition of NRI An individual is considered an NRI if they meet the conditions under the Income Tax Act, 1961, related to their stay in India during the financial year.
Applicability of TDS TDS is applicable on income earned or accrued in India by NRIs, such as rental income, interest income, capital gains, and professional fees.
Higher TDS Rates NRIs are subject to higher TDS rates compared to residents, as they are taxed on gross income without the benefit of deductions under Chapter VI-A.
Common Income Types Subject to TDS
  • Rental Income: 30%
  • Interest Income (NRO Account): 30%
  • Short-Term Capital Gains: 15% under Section 111A
  • Long-Term Capital Gains: 20% (with indexation benefits)
  • Salary Income: As per applicable slab rates
Exemptions NRIs may claim exemptions under Double Taxation Avoidance Agreements (DTAA) between India and their country of residence.
Filing of Income Tax Return NRIs can file an Income Tax Return to claim a refund for excess TDS deducted or to report their total taxable income.
Procedure for Lower TDS NRIs can apply for a certificate under Section 197 from the Income Tax Department to request a deduction at lower rates.
Penalty for Non-Compliance Failure to deduct or deposit TDS correctly can result in penalties for the deductor, and NRIs may face interest or fines for non-payment of taxes.


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