Section 195 : TDS rates for NRI (Non-Resident Indian) as per Income Tax Act

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Hiral Vakil

TDS
TDS Sections

There is no threshold limit under section 195 of Income Tax Act, hence TDS will be deducted from the entire income/amount. TDS shall be deducted at the time of making payment.  Different TDS rates applicable to NRI individuals and companies are in the following table:

TDS rates for NRI under section 195 of Income Tax Act:

Nature of Payment Other than Company Company
Income from the investment made by NRI Citizen 20% NA
Income by way of Long Term Capital Gains referred to in  u/s 115E in case of an NRI Citizen 10% NA
Income by way of Long Term Capital Gains referred to in sub-clause (iii) of clause (c) of sub-section (1) of section 112 10% 10%
Income by way of Long Term Capital Gains as referred to in section 112A   10% 10%
Short Term Capital Gain income from shares and securities referred to in Section 111A 15% 15%
Anu other income by way of Long Term Capital Gains (Other than referred in 10(33), 10(36) and 112A 20% 20%
Income by way of interest payable by a government or an Indian concern on money borrowed or debt incurred by government or Indian concern in foreign currency (Other than interest income referred in Section 194LB or Section 194LC)   20% 20%
Income by way of Royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the government or the Indian concern where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India 10% 10%
Income by way of royalty [not being royalty of the interest nature referred in above] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy. 10% 10%
Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy 10% 10%
Any Other Income 30% 40%
TDS Return (27Q) for NRI Payments (Quarterly)
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TDS Return (27Q) for NRI Payments (Quarterly)
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TDS at the higher rate of 20% or TDS rate,  whichever is higher, needs to be deducted if PAN of NRI is not available. Once TDS is deducted by a deductor, TDS return needs to be filed in Form 27Q for that particular quarter.

FAQs

What is the meaning of Non resident?

To decide the residential status of person under income tax, we need to check the basic and additional conditions and other criteria prescribed under section6 of the Income tax act, 1961. Only Non resident covered under this section, Resident but not Ordinary Resident ( RNOR) not covered this section. 

When to deduct the TDS?

TDS has to be deducted at the time of credit or payment whichever is earlier. Crediting which means even crediting in suspense account or any other name called considered as deemed to be credited, accordingly the TDS will apply.

What will be the exchange rate for TDS on non resident?

Exchange rate of Reserve Bank of India (RBI) on the day which TDS required to be deducted has to be considered. 

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