TDS on payments to Non-Residents are always a complex subject. Income Tax rules for residents and Non-Residents (NRIs) differ in certain ways. This document covers TDS on Payments to NRI (Section 195), TDS Payments to Government and TDS Returns, Lower Deduction / NIL Deduction of TDS.
Section 195 of Income Tax Act, 1961 deals with deduction of TDS on payments to NRI.
1.1. Applicability: Any person (Resident or Non-Resident of India) who is liable to pay any sum to Non-Resident Indians (NRI) are required to deduct TDS u/s 195 and file the related TDS returns. In Short
1.2. Nature of Payments: All payments payable to NRI’s except Salaries (TDS to be deducted u/s 192), interest payable u/s 194LB, 194LC and 194LD
1.3. Time of Deduction: The TDS needs to be deducted on the following times which ever is earlier
1.4. Threshold Limit: There is no Threshold limit for the TDS deduction on payments to NRI u/s 195. If the income of NRI’s is liable for taxes in India, then the payer needs to deduct TDS u/s 195.
1.5. TDS Rates: The following are the TDS rates on different types of payments to Non-resident Indians (NRIs)
|#||Nature of Payment||Rate of TDS|
|2||Short Term Capital Gains u/s 111A||15%|
|3||Short Term Capital Gains other than 111A||30%|
|4||Long Term Capital Gains u/s 112A exceeding Rs 1 Lakh||10%|
|5||Long Term Capital Gains on Securities other than 112A||10%|
|6||Long Term Capital Gains on Sale of property (TDS needs to be deducted on Sale Value) (* refer section 2.2 below)||20%|
|7||Other Income||@ normal Slab Rates of Tax|
|8||House Property Rent||30%|
The above TDS rates are only Tax rates. Corresponding Education cess @ 4% and Surcharge @ 10%/15%/25% depending on the income should be deducted along with above tax rates
In case of NRIs selling a property / apartment / flat / house / commercial land etc. with long term capital gains, attracts appropriate TDS rates based on the sale value.
|< 50 Lakhs||50 Lakhs - 1 Crore||More than 1 Crores||1 - 2 Crores||2 to 5 Crores|
|Long Term Capital Gain Tax||20%||20%||20%||20%||20%|
|Surcharge||Nil||10% of Above||15% of Above||25% of Above||37% of Above|
|Total Tax (include Surcharge)||20%||22%||23%||25%||27.4%|
|Health & Ed.Cess||4% of Above||4% of Above||4% of Above||4% of Above||4% of Above|
|Applicable TDS Rates (include Surcharge & Cess)||20.8%||22.88%||23.92%||26%||28.496%|
The TDS deducted on payments to Non-Resident Indians (NRI) should be paid to the Government within 7 days from the end of the month in which the tax is deducted. TAN is mandatory for deduction of TDS u/s 195
For Example, If TDS is deducted on 14/05/2021, the TDS needs to paid on or before 07/06/2021
The TDS returns for the payments to NRI should be filed in the form 27Q. It needs to be filed quarterly and the due dates are as follows
Form 16A is the TDS certificate to be issued by the deductor to the deductee in respect of the tax deducted and deposited as TDS u/s 195. Form 16A should be given by the Deductor to Deductee within 15 days from the date of filing.
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