{"id":3497,"date":"2020-01-28T17:11:26","date_gmt":"2020-01-28T11:41:26","guid":{"rendered":"https:\/\/aktassociates.com\/blog\/?p=3497"},"modified":"2021-12-14T17:59:17","modified_gmt":"2021-12-14T12:29:17","slug":"tds-rate-for-nri","status":"publish","type":"post","link":"https:\/\/aktassociates.com\/blog\/tds-rate-for-nri\/","title":{"rendered":"FAQ On TDS Rate For Non Resident Indian (NRI)"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">As per the income tax act, 1961. There are certain payments that have been defined in which the payer is required to deduct the TDS with the transaction with resident or Non-resident. Normally, people are aware of the TDS rates applicable when the payee is resident and when the question raised about NRI, then we know only section 195 of the income tax act. Friends, there are other section has also been prescribed under income tax act in which the payer is required to deduct the TDS when the payee is NR on some specific transactions.<\/span><\/p>\n<p><a href=\"https:\/\/www.youtube.com\/watch?v=GX3CcrjvXRk&amp;t=4s\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-3595 size-full\" src=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/Untitled-design-5.png\" alt=\"tds on property\" width=\"700\" height=\"400\" srcset=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/Untitled-design-5.png 700w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/Untitled-design-5-300x171.png 300w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/Untitled-design-5-20x11.png 20w\" sizes=\"(max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><span style=\"font-weight: 400;\">In this article, we will discuss all the major TDS deduction which is compulsory to be made on the payment to NRI. NR means <a href=\"https:\/\/aktassociates.com\/blog\/types-of-accounts-for-non-residents\/\">Non-resident<\/a>, it can be an individual or a company or any association. Mostly Non-resident came to India for making the investment. They can make the investment through the purchase of property or invest in shares or mutual funds or business trust or any other security. In each kind of security, different TDS rates have been prescribed. So, Let&#8217;s begin.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >In this article, we will discuss about...<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #1e73be;color:#1e73be\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #1e73be;color:#1e73be\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/aktassociates.com\/blog\/tds-rate-for-nri\/#Q_What_is_the_TDS_rate_on_the_interest_amount_earned_under_the_section_to_be_paid_to_NR_or_foreign_company\" title=\"Q What is the TDS rate on the interest amount earned under the section to be paid to NR or foreign company?\">Q What is the TDS rate on the interest amount earned under the section to be paid to NR or foreign company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/aktassociates.com\/blog\/tds-rate-for-nri\/#Q_When_the_TDS_is_deducted_under_section_195\" title=\"Q When the TDS is deducted under section 195?\">Q When the TDS is deducted under section 195?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/aktassociates.com\/blog\/tds-rate-for-nri\/#Q_Whether_TDS_is_required_to_be_deducted_on_the_online_advertising_payment_made_to_NR_whose_PE_is_not_in_India\" title=\"Q. Whether TDS is required to be deducted on the online advertising payment made to NR whose PE is not in India?\">Q. Whether TDS is required to be deducted on the online advertising payment made to NR whose PE is not in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/aktassociates.com\/blog\/tds-rate-for-nri\/#QWhat_are_the_consequences_if_the_payer_did_not_deduct_the_TDS_on_the_payments_related_to_interest_or_royalty_fees_or_fees_for_technical_services\" title=\"Q.What are the consequences if the payer did not deduct the TDS on the payments related to interest or royalty fees or fees for technical services?\">Q.What are the consequences if the payer did not deduct the TDS on the payments related to interest or royalty fees or fees for technical services?<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Q_What_is_the_TDS_rate_on_the_interest_amount_earned_under_the_section_to_be_paid_to_NR_or_foreign_company\"><\/span><b>Q What is the TDS rate on the interest amount earned under the section to be paid to NR or foreign company?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><b>An <\/b><span style=\"font-weight: 400;\">Interest can be given on many payments, here we will talk about the specific payments on which tax rate has been defined under the income tax act, 1961 and which is required to be deducted as tax under section 195<\/span><\/p>\n<p><b>Section 115(A):<\/b><span style=\"font-weight: 400;\"> This section covers 4 subsections in which different types of interest are covered. This section shall be applicable, whether the NR as having a PE in India or not.<\/span><\/p>\n<p><b>Section 195<\/b><span style=\"font-weight: 400;\">: As per this section TDS is required to be deducted @ 20% when the interest income earned under section 115A(1)is being paid by the Indian concern or the government on the loan given by the NR in foreign currency, other than the interest referred to in 2,3 &amp;4 below.<\/span><\/p>\n<p><b>Section 194LB:<\/b><span style=\"font-weight: 400;\"> Under this section, where the NR has invested in any infrastructure debt fund in foreign currency than such funds shall deduct the TDS @ 5% under <a href=\"https:\/\/aktassociates.com\/blog\/tds-under-section-194la-194lb-194lba-194lbb-194lbc\/\">section 194LB<\/a> on the interest amount to be paid to such NR to a foreign company.<\/span><\/p>\n<p><b>Section 194LC:<\/b><span style=\"font-weight: 400;\"> If the interest is being due from any Indian company or the business trust to NR or foreign company on the loans or bonds or rupee-denominated bonds which has been subscribed by the NR in foreign exchange within 01.07.2012 to 30.06.2020 and which has been approved by the government of India, then on such interest, the Indian company or the business trust, as the case may be, shall deduct the TDS on the interest amount @5% under section 194LC.<\/span><\/p>\n<p><b>Section 194LD: <\/b><span style=\"font-weight: 400;\">This section is applicable where the payee is FII. You may have noticed that in all the above subsection, to deduct TDS under these sections, it was compulsory that the payee should invest in India in foreign currency but the same not happen in this subsection. In other words, TDS shall be deducted on the interest payment @5% under section 194LD even if he has invested in any currency.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The period for income from an investment should be earned from 31.05.2013 to 30.06.2020 and the securities can be rupee-denominated bonds or any other government security.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Also, if they have sold the securities from which they have earned a long term or <a href=\"https:\/\/aktassociates.com\/blog\/capital-gain-tax-deduction-sale-property\/\">short term capital gain<\/a> which is taxable under <a href=\"https:\/\/aktassociates.com\/blog\/union-budget-2019-20\/\">section 112A<\/a> or 111A, then there is no requirement for the deduction of TDS.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You see, the government has given many benefits in respect of rupee-denominated bonds. If you want to know more about these bonds then you can refer our previous articles in which we have made a detailed discussion on these bonds.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Q_When_the_TDS_is_deducted_under_section_195\"><\/span><b>Q When the TDS is deducted under section 195?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/aktassociates.com\/blog\/tds-under-section-195\/\">Section 195<\/a> is a general section of the income tax act, 1961 in which it defines different rates of TDS which is required to be deducted on the payment to NR. Like as I specified above section, another section is also mentioned in the income tax act which deals with different rates of TDS on the payment to NR. For example, TDS shall be deducted on the royalty fees or fees on technical services to NR under section 115A where such NR is not having the permanent establishment in India and under section 44DA where the NR is having the permanent establishment in India. These sections are very wide, although if you have any queries in respect of these sections, then you can inform us. We will make a specific article on these sections as per your request.<\/span><\/p>\n<h3><a href=\"https:\/\/aktassociates.com\/nri-lower-tds-certificate-sale-of-property-in-india\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-3452\" src=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/TDS-CERTIFICATE-1.jpg\" alt=\"TDS CERTIFICATE\" width=\"700\" height=\"150\" srcset=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/TDS-CERTIFICATE-1.jpg 700w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/TDS-CERTIFICATE-1-300x64.jpg 300w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/TDS-CERTIFICATE-1-20x4.jpg 20w\" sizes=\"(max-width: 700px) 100vw, 700px\" \/><\/a><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"Q_Whether_TDS_is_required_to_be_deducted_on_the_online_advertising_payment_made_to_NR_whose_PE_is_not_in_India\"><\/span><b>Q. Whether TDS is required to be deducted on the online advertising payment made to NR whose PE is not in India?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li><b> <\/b><span style=\"font-weight: 400;\">First, let me tell you what is PE because it will be relevant in other cases also.<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">PE means Permanent Establishment and it includes:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Business<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Profession<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Office<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Factory<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Mine<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">So, if the NR is doing the transaction through the permanent establishment (PE), then on online advertisement services provided by such NR, TDS is required to be deducted under section 195 i.e. 30% in case of NRI and 40% in case of Foreign company.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">But what if he does not have any PE in India and he is providing the services directly from abroad. In this case, there is no TDS mentioned in the act. Instead, the government has introduced other term i.e. equalization levy which needs to be deducted by the payer to the NR who does not have PE in India.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In simple words, the Equalisation levy is nothing but the other name of TDS. Although, it contains some conditions for the deduction of Equalisation levy which are as follows:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The payer should be the resident person of India or a Non-resident person whose PE is in India.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Where the consideration amount for such online advertisement services is Rs.1 Lakhs or more.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The payer has taken such specified services for the purpose of his business or profession in India.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The Equalisation levy is required to be deducted at @ 6% of the amount of consideration.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The due date for depositing of Equalisation levy is the same as TDS i.e. 7<\/span><span style=\"font-weight: 400;\">th<\/span><span style=\"font-weight: 400;\"> of the next month in which it was deducted.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Normally it is seen that NR does not allow to deduct the TDS on his payment, in such case, the payer can deposit the TDS by grossing up the consideration amount.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Similar to section 40(a)(i), under section 40(a)(ib), if the payer does not deduct the TDS or deducted but fails to deposit the Equalisation levy within the due date of filing of the return, then the expenditure shall be disallowed in the hands of payer.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Likewise, such payment shall be allowed in the financial year in which the payer has deposited such Equalisation levy to the government account.<\/span><\/p>\n<p><a href=\"https:\/\/aktassociates.com\/nri-lower-tds-certificate-sale-of-property-in-india\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-3865 size-full\" src=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2021\/12\/For-Consultation-from-Experts-Please-contact-1.jpg\" alt=\"nri consulting\" width=\"700\" height=\"150\" srcset=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2021\/12\/For-Consultation-from-Experts-Please-contact-1.jpg 700w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2021\/12\/For-Consultation-from-Experts-Please-contact-1-300x64.jpg 300w\" sizes=\"(max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<h3><span class=\"ez-toc-section\" id=\"QWhat_are_the_consequences_if_the_payer_did_not_deduct_the_TDS_on_the_payments_related_to_interest_or_royalty_fees_or_fees_for_technical_services\"><\/span><b>Q.What are the consequences if the payer did not deduct the TDS on the payments related to interest or royalty fees or fees for technical services?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li><b><\/b><span style=\"font-weight: 400;\"> In case, where the resident payer is liable for the deduction of TDS, which is payable in India or outside India and fails to deduct the TDS\u00a0<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Or deduct but fails to deposit it within the due date of filing of return under section 139(1) of Income Tax act, then the expanse on whose payment TDS was to be deducted shall be disallowed in the hands of the resident payer.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In such a case, the assessee shall be treated as assessee in default under section 201 (1)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although, such a resident payer may claim the expenditure in the financial year in which he has deposited the number of TDS which is deducted on the payment of NR.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In simple words, As per section 40(a)(i) of Income-tax act, 1961, the expenditure in the hands of resident payer shall be disallowed if on the interest or royalty fees or fees for technical services or any other sum but other than salary (Because on salary, TDS is deducted under section 192)<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"><strong>Case:1<\/strong> TDS was deductible, but the payer has not deducted to NR being individual or foreign company or<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"><strong>Case:2<\/strong> Where the TDS has been deducted but the resident payer fails to deposit it within the due date of filing of return.<\/span><\/li>\n<\/ul>\n<p><a href=\"https:\/\/aktassociates.com\/nri-lower-tds-certificate-sale-of-property-in-india\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-3453\" src=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/nri-tax-17500.jpg\" alt=\"nri tax\" width=\"700\" height=\"150\" srcset=\"https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/nri-tax-17500.jpg 700w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/nri-tax-17500-300x64.jpg 300w, https:\/\/aktassociates.com\/blog\/wp-content\/uploads\/2020\/01\/nri-tax-17500-20x4.jpg 20w\" sizes=\"(max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><span style=\"font-weight: 400;\">Now, why I\u2019m repeating this provision because, there is a major change has been introduced from finance Act, 2019 in which it states that expenditure shall be allowed to the resident payer in case 1 i.e. where the TDS was deductible by him but he fails to deduct the TDS and he is deemed as assessee in default under section 201.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As per section 201 of the IT Act, a person shall not be treated as assessee in default even if he has not deducted the TDS on the payment to be made to NR if:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Such NR being recipient has filed his return of Income within the due date under <a href=\"https:\/\/aktassociates.com\/blog\/reasons-rectification-of-defective-notice\/\">section 139<\/a><\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">NR has taken all the income in his return of Income<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">NR has paid the Taxes on the income declared in the return of Income.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The resident payer has furnished a certificate from a Chartered Accountant in this regard.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Hence, the government has given a big relaxation to all the NR recipients because in some cases, they just have to file the return to claim the refund which has been deducted as TDS.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><strong>Note:<\/strong> Do not confuse 40(a)(i) with 40(a)(ia) because of the later section applicable where a recipient is also a resident person. If the payer fails to deduct the TDS or deducted but fails to deposit it within the due date of filing of return under section 139 then only 30% of the expenditure shall be disallowed to such resident payer.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As per the income tax act, 1961. There are certain payments that have been defined in which the payer is &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"FAQ On TDS Rate For Non Resident Indian (NRI)\" class=\"read-more button\" href=\"https:\/\/aktassociates.com\/blog\/tds-rate-for-nri\/#more-3497\">Read more<span class=\"screen-reader-text\">FAQ On TDS Rate For Non Resident Indian (NRI)<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":3500,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[107],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>FAQ On TDS Rate For Non Resident Indian (NRI) AKT Associates<\/title>\n<meta name=\"description\" content=\"TDS rates specified under section 115A Meaning of PE Equalization levy and condition for deduction penalty for non-deduction of TDS or 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