TDS Rules for NRIs

Why NRI TDS Rates Run Higher

For residents, most payments below a threshold escape TDS entirely, and rates are moderate. For NRIs, the government's logic is different — since it's harder to chase a non-resident for tax owed after the fact, TDS is deducted upfront, often at the maximum applicable rate, with no minimum threshold in many cases. You then either keep the deduction as your final tax (if it matches your actual liability) or claim a refund when filing.

The Full TDS Rate Chart

Income type	Standard TDS rate	Notes
NRO account interest	30% (31.2% with cess)	Deducted from the first rupee, no threshold
Rental income	31.2%	Deducted by tenant on any amount, no minimum
Dividends from Indian companies	20% + surcharge/cess	Often reducible under DTAA
Property sale — long-term (held >24 months)	12.5% on capital gains, or full sale value if no LDC	Buyer deducts under Section 393(2), effective 1 April 2026
Property sale — short-term (held ≤24 months)	Up to 30% (slab-linked)	Same deducting authority
Equity/equity MF — short-term gains	20%	Deducted by broker/AMC at redemption
Equity/equity MF — long-term gains	12.5% above ₹1.25 lakh/year	No indexation benefit

Who's Responsible for Deducting It

Getting a Lower Deduction Certificate

If your actual tax liability is lower than the standard TDS rate — very common, since NRI TDS rates are often flat maximums regardless of your real income bracket — you can apply for a Lower Deduction Certificate under Section 197, using Form 13 on the income tax portal.

Once approved, the certificate specifies the exact reduced rate (or nil, in some cases) that your tenant, buyer, or bank should apply going forward. This is especially valuable for large one-off transactions like a property sale, where 12.5-30% TDS on the full computed gain can otherwise tie up a significant amount of cash until refund processing completes — often many months later.

Alternative: DTAA Instead of Section 197

For interest and dividend income specifically, submitting a Tax Residency Certificate and Form 10F to your bank achieves a similar outcome to a Section 197 certificate — the deductor applies the treaty rate instead of the domestic rate directly. For rental income or property sales, DTAA relief is rarely available, so Section 197 is usually the more relevant route.

Common Mistakes

1. Not applying for Form 13 before a large property sale. Letting the buyer deduct TDS on the full sale value (when no LDC exists) instead of just the capital gains portion can lock up far more cash than necessary until refund time.

2. Assuming TDS deducted equals final tax owed. TDS is a deduction at source, not a final settlement — if your actual liability is lower, you must file an ITR to claim the difference back; it isn't automatic.

3. Landlords not informing tenants of NRI status. Tenants who don't know their landlord is an NRI often apply resident TDS rules incorrectly (or skip TDS below the resident threshold), creating a compliance gap that surfaces later.

Key Takeaway: NRI TDS rates are uniformly higher than resident rates and apply with far fewer thresholds — but they're a prepayment, not a final tax, and Section 197 (Form 13) exists specifically to bring the rate down to your actual liability upfront rather than waiting for a refund. With taxation covered, the final module walks through getting your money back out of India and filing correctly. See Repatriating Money from India.

Frequently Asked Questions

Is there a minimum rent amount below which TDS doesn't apply for NRI landlords?

No — unlike resident landlords, where TDS only kicks in once annual rent crosses ₹2.4 lakh, tenants must deduct TDS on any rent paid to an NRI landlord, regardless of amount.

How long does it take to get a Lower Deduction Certificate under Section 197?

Processing times vary, but applying well ahead of a planned transaction — ideally a few weeks to a couple of months before a property sale or major payment — gives enough buffer for approval before the deduction happens.

If TDS was deducted at the full rate on my property sale, can I still get a refund?

Yes — you can claim back any excess TDS over your actual computed tax liability by filing an Indian income tax return (ITR-2), though this means your money is tied up until the refund is processed rather than accessed upfront.

Do NRIs get the same TDS treatment on equity capital gains as resident investors?

The rates (20% STCG, 12.5% LTCG above ₹1.25 lakh) are the same, but the mechanism differs — brokers and AMCs deduct TDS directly at redemption for NRIs, whereas residents typically pay tax when filing their return without upfront deduction.