What is the Tax Deducted at Source for NRIs under section 195

What is the Tax Deducted at Source for NRIs under section 195

Tax deducting at source means deducting tax at source of income only. Sections 195 of income tax act 1961 covers the TDS on non resident. Any person responsible of making payment to a non corporate non resident assessee or to a company other than a domestic company shall deduct tax at source at the time of payment or at the time of credit whichever is earlier. No tax shall be deducted in case of dividend referred in section 115O and not deductible in case of interest paid or credited by an off shore banking unit on deposit made by non resident.

 Which payments are covered under section 195

 As per section 195 any interest other than interest covered under section 194LB or section 194LC or section 194LD of income tax act or any their sum as specified which is chargeable under this section. However the following payments are excluded from this section

1.         Interest referred in the section 194LB , section 194LC and section 194LD

2.         Any amount received as salary covered under section 192

3.         Dividend under section 115O

Under this section their is no threshold limit mentioned that means TDS shall be deducted for any amount.

  Rates of TDS

Particulars

Rate

Income from investment by NRI

20

Income from long term capital gain under section 115E

10

Income from long term capital gain

10

Income from short term capital gain under section 111A

15

Any other income from long term capital gain

20

Interest payable on money borrowed in foreign currency

20

Royalty payable by government or Indian concern

10

Royalty not being royalty payable by government

10

Any other income

30

 

Procedure to deduct TDS under section 195

 Assesee need to obtain form 15CB from a chartered accountant while making the payment to the non resident and need to file form 15CA online in income tax website through their PAN log in. After online submitting of form 15CA assessee need to take a print out and sign and submit along with form 15CB to the banker to make the payment. This procedure has to be followed for making each and every payment. The following are the details to be submitted to CA to obtain form 15CB

l  Invoices and agreements

l  Correspondences

l  Payment details

l  Remitting bank details

l  Rate of conversion of foreign currency

l  Proof of service being rendered

 Whether NRI eligible for Lower deduction

NRI can make request for lower deduction or non deduction of TDS to income tax department after complying with following conditions

1.         Assesee has regularly filing the income tax returns before due date of filing returns

2.         Assesee is not in default of any interest, tax ,penalty or any other sum

3.         Carrying on business for at least 5 years

4.         Fixed assets value in India exceed Rs 50 Lakhs

 Default in section 195

 1.         Dis-allowance of expenditure

2.         If TDS deducted but not paid Interest at 1.5% per month from the date deduction to date of deposit

3.         If TDS deducted and not paid penalty under section 221