All payments made to NRIs involve TDS deductions. This is applicable even if their income falls within the income tax slab of 0% - which is for those earning an annual income below ₹2.5 lakh. The person making the remittance to non – resident needs to furnish an undertaking (in form 15CA) accompanied by a Chartered Accountants Certificate in Form 15CB.
Owing to Section 195 of the Income Tax Act, TDS deductions for NRIs are applicable to every type of income.
TDS for NRI
TDS deductions for NRIs are applicable on most common types of income earned such as:
- Rent from property located in India
- Any capital gain on transfer of capital asset which is situated in India shall be taxable in India.
- Having a long term capital gain on sale of house property, the buyer shall deduct TDS at 20%. However, a person can claim capital gain exemption by investing in a house property as per Section 54 or investing in capital gain bonds as per Section 54EC.
- Interest income from savings accounts and fixed deposits that is held in Indian accounts is taxable in India.
- Interest on NRO accounts is fully taxable.
- Interest on FCNR and NRE accounts is tax-exempt.
- Sale of shares, bonds, and mutual funds.
- Payments received for offering services to Indian customers
If NRIs file Income Tax Returns (ITR) after the financial year has ended in India, they can claim refunds on the deducted TDS. For an NRI to claim a refund on the TDS deducted, he/she must self-compute their income and tax liability according to existing slab rates.
The NRI would be required to file this Income Tax Return before 31st July of the next financial year. Any delay beyond the 31st July but before 31st Dec would attract a penalty of Rs. 5,000 and any delay beyond 31st Dec but before 31st March would attract a penalty of Rs. 10,000.
Suggested Read: Income Tax Return Due Date.
For ITR of Financial Year 2017-18 onwards, in case, you have income from business or profession or capital gains, you are an NRI, director of a company or you own foreign assets or foreign income, it has been mandated that NRIs cannot file ITR-1 (Income Tax Returns 1) form, and they must instead file the ITR 3 or ITR 2. If an NRI has a business located in India from which they are generating income, they are required to file ITR 3. However, if they do not generate income from business and are instead earning through capital gains from the sale of bonds, shares or mutual funds or property, or through rent, they can file ITR 2 instead.
- If the income earned from India is less than Rs. 2.5 Lakhs and the NRI needs to claim a refund of the excess TDS Deducted.
- If tax Liability of NRIs exceeds Rs 10,000 in a financial year, they must pay advance tax and if advance tax not paid then interest under section 234B and 234C is applicable.
If an NRI decides to file ITR 2 himself/herself, they are advised to download the Java or Excel utility from the website of the Indian Income Tax department and select only the parts of the document applicable to their individual situation.
NRIs must remember that it takes at least 6 months to issue refunds. Refunds are issued with an annual 6% interest. NRIs should also take advantage of deductions which are available owing to Section 80C and can help them further reduce tax liability.
How to claim TDS refund?
To claim a refund of the TDS Deducted, the NRI would be required to file an income tax return in India after the end of the financial year. While filing the Income Tax Return, the NRI will have to self-compute his income and the income tax liability as per the slab rates.
How to apply for TDS refund?
To apply for TDS refund, the following steps must be followed:
- Visit the income tax portal
- Login to download the relevant Form for an income tax refund.
- Enter all the particulars and submit the form.
- If the company has deducted tax, in the case if you are not eligible for it, you can claim the amount by filing the ITR (income tax returns).
What is the TDS refund process?
The following steps must be followed to claim the TDS refund:
- You have to file your income tax returns on income tax portal before the due date
- This return needs to be e-verified by using a digital signature/ an Aadhaar based OTP/ or your net banking account.
However, if you haven’t been able to e-verify the ITR, then you can complete the verification by sending a signed hard copy of the return to the Income Tax department.
How to claim TDS refund of previous years?
You have one year from the end of the assessment year to file your income tax return for refund. So now you can make an application for condonation of delay for any financial year.
What is TDS withdrawal process for NRI?
NRI needs to file ITR for relevant financial year to claim tds refund and return should be E-verified.
How to Claim TDS Online for NRI?
Tax Deducted at Source (TDS) refunds can be claimed online and require the filing of income tax returns. The following steps should be followed:
- Sign in or create an account on the Income Tax Department's online e-filing portal. The link to the portal is: incometaxindiaefiling.gov.in.
- Fill up the respective Income Tax Return (ITR) form with the necessary information.
- The portal generates an acknowledgement when the ITR is submitted.
- Use a digital signature, a net banking account, or an Aadhaar-based one-time password (OTP) to e-verify the acknowledgement.
Whether TDS deducted on Insurance Claim for NRI?
Yes, under Section 195 of the Income Tax Act, 1961 - tax will be deducted at source (TDS).
How to claim TDS deducted on PF withdrawal?
The members EPF are entitled for refund on PF withdrawal if their income is less than ₹ 2,50,000 in a financial year. For this purpose, the concerned taxpayer needs to show the EPF withdrawal as salary income while filing the income tax returns. The taxpayer can submit Form 15G/Form15H if tax on his/her total income including EPF withdrawal is NIL. If Form 15G/Form 15H is submitted, no TDS is deducted.
Interest on Income Tax Refund
Interest is charged from the day a refund is granted under section 143(1) until the usual assessment date. Interest under Section 234D is levied @½ % per month or part of the month.
TDS Return Status check
The following steps should be followed to check the TDS return status:
- Visit the TIN-NSDL portal.
- Click on the “Services” section
- Further, on the dashboard on the TIN-NSDL portal, click on the “Status of Tax Refunds” option.
- Later click on the “Quarterly Statement Status”
- Enter TAN, Provisional Receipt number, and Captcha code
- Click on the “View Status” option.