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

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:

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

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%
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

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. 

I am an NRI and invest in the stock market. Whenever I earn short term capital gains on the sale of stock, TDS of 15% is deducted from my account as per RBI norms. Is this TDS deduction mandatory even if my total taxable income in India is less than INR 2.5 lacs?

Yes, as per RBI norms every time a payment is to be made to you, the payer of that amount is duty bound to deduct tax at source under section 195 of the Income Tax Act even if your total taxable income in India is less than INR 2.5 lacs. You can claim the refund of TDS deducted by filing the Income Tax Return in India.

Got Questions? Ask Away!

  1. Hey @Dia_malhotra

    As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.

    Hope this helps!

  2. Hey @HarishMehta

    TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:

    1. Fees for professional services
    2. Fees for technical services
    3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
    4. Royalty
    5. Any sum referred to in clause (VA) of section 28.

    Hope this helps!

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