NRIs & TDS
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As an NRI, income earned in India is taxable in India. Based on the nature of the income, tax could be deducted at the source (TDS).
But rates of TDS and refunds for NRIs vary.
NRIs & Tax
Here is a closer look at TDS under various income heads for an NRI, and the rates applicable
Working Your Way Through TDS
Interest on NRO accounts is taxable, but tax-free for NRE & FCNR (B) accounts.
Interest Income
TDS is deducted at 31.2% on NRO accounts for interest earned up to Rs 50L in a fin year.
Capital Gains On MFs
TDS is done at the highest applicable tax rate on capital gains made from selling mutual funds.
STCG
For equity-oriented funds (investing 65% or more into equities), any redemption made within a year of purchase attracts Short-Term Capital Gains (STCG) tax of 15%, which is also the TDS rate.
LTCG
For equity-oriented funds sold after a year, TDS on Long-Term Capital Gains (LTCG) is 10% without indexation benefit.
Capital Gains On Stocks & Derivatives
Like equity MFs, 10% TDS and 15% TDS is applicable on LTCG and STCG respectively, on the sale of equity shares.
Rent & Sale Of Property
A rental property will have a TDS of 31.2% deducted by the tenant from the rent.
If you sell property within 2 years of purchase, TDS rates of 30% are applicable.
DTAA
If you live in a country with which India has a Double Tax Avoidance Agreement, TDS rates are lower.
Currently, TDS rates for most of DTAA countries are at 10-15% of interest income.
Takeaway
TDS on NRI income is usually done at the maximum rate - but, by making necessary applications to tax authorities and seeking DTAA benefits, TDS rates can be reduced.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.