Ans.
The TDS and Income tax rates applicable to NRIs as per the provisions of the IT Act is outlined
in below table along with the source of income against which NRI can avail
basic exemption limit or claim deduction under Chapter VI-A, subject to the provisions of
DTAA which
generally override the provisions of the IT act as per the option/choice of the
taxpayer. Accordingly, NRIs
can take recourse of beneficial rates (if any) applicable to them under DTAA
between India and NRI’s country of residence as in which case the below rates
will be revised as per DTAA rates.
Sr. No.
|
Type of Asset and Source of Income
|
Chapter VI-A
Deduction available
|
Benefit of
basic exemption
|
Basic rate
under the Act
(plus applicable Cess and Surcharge)
|
|
|
Income tax
rate (Note 1)
|
TDS (Note 1 and 2)
|
|
I
|
Immovable Property
|
|
|
|
|
|
|
A
|
Rent
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
|
B
|
Long Term Capital Gains (LTCG)
|
No
|
No
|
20%
|
20%
|
|
|
C
|
Short Term Capital Gains (STCG)
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
|
|
|
|
|
|
|
|
II
|
Bank Accounts
/ Fixed Deposits/ Public Provident Fund (PPF)/ Tax free bonds
|
|
|
|
|
|
|
A
|
Interest on NRO a/c
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
|
B
|
Interest on NRE a/c
|
NA
|
NA
|
Exempt
|
NIL
|
|
|
C
|
Interest on FCNR Deposits
|
NA
|
NA
|
Exempt
|
NIL
|
|
|
D
|
Interest on PPF a/c
|
NA
|
NA
|
Exempt
|
NIL
|
|
|
E
|
Interest on Tax free bonds
|
NA
|
NA
|
Exempt
|
Nil
|
|
|
F
|
Interest income on Debentures (Note 1)
|
Yes
|
Yes
|
Special Rate/Slab
Rate
|
30%
|
|
|
G
|
Interest income on Bonds (Note 1)
|
Yes
|
Yes
|
Special
Rate/Slab Rate
|
30%
|
|
|
|
|
|
|
|
|
|
III
|
Equity Shares
- Listed (STT Paid both at the time of Purchase and Sale)
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
10% (with
Grandfathering for shares acquired on/before January 31, 2018)
(upto Rs. 1,00,000/- exempt)
|
10%
|
|
B
|
STCG
|
No
|
No
|
15%
|
15%
|
|
|
|
|
|
|
|
|
|
IV
|
Equity Shares – Unlisted
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
10% (without
indexation and no benefit of foreign exchange fluctuation)
|
10%
|
|
B
|
STCG
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
V
|
Units of
Mutual Funds - Equity Oriented (STT Paid at the time of Sale) (Note- 3)
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
10% (with
Grandfathering for mutual funds acquired on/before January 31, 2018)
(upto Rs. 1,00,000 exempt)
|
10%
|
|
B
|
STCG
|
No
|
No
|
15%
|
15%
|
|
|
|
|
|
|
|
|
|
VI
|
Units
of Debt Mutual Funds, Specified Mutual Funds acquired before April 1, 2023 and Equity Oriented Mutual Funds (STT
not paid on sale) [Listed] (Note 3)
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
20% (with
indexation)
|
20%
|
|
|
B
|
STCG
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
|
|
|
|
|
|
|
|
VII
|
Units of Mutual funds – Specified
Mutual Funds acquired on or after April 1, 2023 (Note 3)
|
|
|
|
|
|
|
A
|
Deemed STCG
|
Yes
|
Yes
|
Slab rate
|
30%
|
|
|
|
|
|
|
|
|
|
VIII
|
Listed Bonds
(Other than Zero Coupon bonds, Sovereign Gold Bonds and Capital Indexed
Bonds)
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
10%
(Without indexation)
|
20%
|
|
|
B
|
STCG
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
IX
|
Listed
Debentures (other than Market Linked Debentures)
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
10%
(Without indexation and benefit of foreign exchange fluctuation is available)
|
20%
|
|
|
B
|
STCG
|
Yes
|
Yes
|
Slab rate
|
30%
|
|
|
|
|
|
|
|
|
|
X
|
Unlisted Debentures
|
|
|
|
|
|
|
A
|
LTCG
|
No
|
No
|
10% (Without
indexation and no benefit of foreign exchange fluctuation)
|
10%
|
|
|
B
|
STCG
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
|
|
|
|
|
|
|
|
XI
|
Market
Linked Debentures (Note 4)
|
|
|
|
|
|
|
A
|
Deemed Short Term
|
Yes
|
Yes
|
Slab rate
|
30%
|
|
|
|
|
|
|
|
|
|
XII
|
Dividend Income from Shares
|
No
|
No
|
20%
|
20%
|
|
|
|
|
|
|
|
|
XIII
|
Income From units of Mutual Funds (Note 1)
|
Yes
|
Yes
|
Special Rate/Slab rate
|
20%
|
|
|
|
|
|
|
|
|
XIV
|
Salary
|
Yes
|
Yes
|
Slab Rate
|
30%
|
|
Note
1:
· The IT Act provides for various Special Regime
of taxation for NRIs (eg. Section 115A, Section 115C to Section 115I etc.), in
which specific tax rates (“Special Rate”) are given for certain nature of
income earned by NRIs. In certain special regime, NRI has an option to opt for
special rate of tax (if beneficial). Section 115C to Section 115I housed under
Chapter XIIA of the IT Act is one of the Special Regime and FAQs related to
this Special Regime. Therefore,
it is important to evaluate if any source of income tabulated above is taxable or
eligible for taxation at special rate of tax before finalizing the tax position.
· The TDS rate mentioned in the above table may
also undergo change depending upon the classification of income under the Special
Regime and same has to be evaluated accordingly.
Note 2: It is the responsibility of the payer to deduct TDS at
the time of making payment to the NRI individual. However, if payer has failed
to deduct TDS, due to which, NRI is liable to pay any taxes in India, he/she
can discharge the same by way of advance tax and/or self-assessment tax
etc.
Note 3: Mutual Funds are classified as under:
Nature of Mutual Fund
|
Percentage of investment
|
Specified
|
Investment of Less than or equal to 35% of Total proceeds in
equity shares of domestic company
|
Others (Debt)
|
Investment of less than 65% but more than 35% of its proceeds
in equity shares of listed domestic company
|
Equity oriented
|
i. In case where the fund invests in units of another fund which
is traded on recognized stock exchange:
- 90% or more of its total proceeds is invested in other fund, and
- Other fund also invest 90% or more of its total proceeds in the
equity share of domestic companies listed on a recognized stock exchange
and
ii. In any other case, 65% or more of its proceeds is
invested in equity share of domestic companies listed on a recognized stock
exchange
|
As
per recent amendment, Benefit of Indexation for the calculation of Long-term
capital gains on “Specified Mutual Funds” will not be available for
Investment made on or after April 1, 2023, and Gain arising from such type of Mutual
fund will attract tax as per Normal tax rate as per slab applicable to
Individual.
Note-4:
- "Market Linked Debenture" means a
security by whatever name called, which has an underlying principle component
in the form of a debt security and where the returns are linked to market
returns on other underlying securities or indices and include any security
classified or regulated as a market linked debenture by the Securities and
Exchange Board of India;
- As per recent amendment, Capital gain arising on
Sale of Market Linked Debentures sold on/after April 1, 2023, shall be deemed
as short-term capital gain. Therefore, no Benefit of Indexation shall be
available.
·